Fred Wilson on Why the Collapse of Venture Capital is Good

that could turn into companies. And some of them might actually become venture funded, and some of them might not need venture funding because they raised enough money with their Kickstarter project that they can get all the way they need to go without it.

Could part of the problem be that there's actually too much money available for entrepreneurs?

I don't think there's too much money sitting around. I think there's too much money in too few hands. So when six white guys in suits control two and a half billion dollars, that's not a good thing. Instead of being allocated just to one firm, it would be better if that two and a half billion dollars was allocated to 25 firms at $100 million each. It would lead to more diversity or people trying more things: data sciences, urban sciences, transportation, energy, materials science, and many others.

How do you fix a problem like that?

It's a challenging problem, because I think people who invest in venture capital like to go into deals together, and they like to invest in firms that have brand names and have long track records. That's what leads to a concentration of money in a few big-name firms. I think it's a little bit of how the system is just set up.

One of my hopes is that as there are more angel investors out there, and the amount of money it takes to make a company successful comes down, entrepreneurs are going to have more options.

This article originally appeared on August 21, 2012, and was updated on September 7, 2012.

business, business impact, Fred Wilson, Kickstarter, VCs, venture capital, venture capitalism

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