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In a free market, nobody truly has power. If they suck, they just cease to matter and can safely be ignored. Only the _competition_ matters, and people who suck

by javert 14y ago

In a free market, nobody truly has power. If they suck, they just cease to matter and can safely be ignored. Only the _competition_ matters, and people who suck usually aren't the competition (if they are, they are easy pickings). Now, none of this applies if we're talking about big business vendor/regulatory lock-in type situations, but that's not the part of the economy I think you're talking about. So what makes you thnk that the current VC "organism" has "power" and that "nothing good is going to happen" until they are removed? I mean, why can't people just ignore them and go do things separately?

michaelochurch 14y ago
The problem is that VCs don't really compete with each other at all. They co-fund a lot of deals and it's more important to them, in the long term, that they "get in on" the few blockbuster deals that exist every year, than it is that they make the best investments. So they're not going to piss off another VC who might have access to good deals. The result is that they end up colluding more than they compete, and the result is that entrepreneurs don't get fair terms, but terms set by a VC in-crowd. They also compare notes on who they like and who they don't, and if you turn down a term sheet you're likely to have that VC pick up a phone and dry up interest in other VC firms that are supposed to be his competitors.
- javert 14y ago
  I think you must be talking about the Silicon Valley VC crowd. I'm sure there are VCs in other places. And if you're right about the Silicon Valley VC crowd, that's a business opportunity for new VCs in that area to set better terms and not collude.
anigbrowl 14y ago
Perfect competition of that kind only exists in markets where the product is fungible and consumers can easily substitute suppliers. Participants in such a market are price takers as you describe. The VC market is more a case of monopolistic competition, or monopsonistic if you prefer.

by javert 14y ago

michaelochurch 14y ago

The problem is that VCs don't really compete with each other at all. They co-fund a lot of deals and it's more important to them, in the long term, that they "get in on" the few blockbuster deals that exist every year, than it is that they make the best investments. So they're not going to piss off another VC who might have access to good deals. The result is that they end up colluding more than they compete, and the result is that entrepreneurs don't get fair terms, but terms set by a VC in-crowd. They also compare notes on who they like and who they don't, and if you turn down a term sheet you're likely to have that VC pick up a phone and dry up interest in other VC firms that are supposed to be his competitors.

javert 14y ago
I think you must be talking about the Silicon Valley VC crowd. I'm sure there are VCs in other places. And if you're right about the Silicon Valley VC crowd, that's a business opportunity for new VCs in that area to set better terms and not collude.

anigbrowl 14y ago

Perfect competition of that kind only exists in markets where the product is fungible and consumers can easily substitute suppliers. Participants in such a market are price takers as you describe. The VC market is more a case of monopolistic competition, or monopsonistic if you prefer.