Wednesday, June 10, 2009

Kedrosky on Venture Capital

Really interesting piece by Paul Kedrosky on Venture Capital. His argument is that VC is overfunded, leading to too many "me too" deals, high early stage valuations and low exit multiples. He thinks the industry should contract and provides some powerful charts showing fundraising efforts that greatly exceed historical norms. One quick criticism is those numbers should be inflation adjusted, but that is splitting hairs. He's probably right. I'm biased here, but I think the best firms are going to continue to raise money and continue to provide strong returns.

However, I think this raises a bigger question. If the VC world still hasn't normalized 10 years after the tech bubble, how long will it take the housing and mortgage markets to normalize? Those bubbles were even larger than the tech world and greatly influenced the broader economy. Something to think about when all the experts on TV start calling for housing to come back...