Fred Wilson has a post with the title “Death to the Use of Death in a Title” which is explaining the tweeting, blogging and popular media picking on his #Rethink VC talk. GigaOm covers this in the article “Fred Wilson: What Crowdfunding means for VC business” Fred is challenging the VC business to rethink the business model. He offers some insights and discussions around what he thinks is broken and how to fix it. The conclusion or symptom of the VC business being broken is based on the report published by Kauffman Association. I dont believe the VC business is broken, the values, principles and the dogma the practioners have created in the VC business is broken. I also believe that the metrics to measure success of the VC business is broken, actually if we think about it the report and the popular media focuses so much on a single stakeholder i.e the Limited Partner or the Returns to the Limited Partner. I am not so sure if that is the right model or metric. I really believe we need to have metrics that measures and benchmarks all the elements or stakeholders. Lets think about the stakeholders of any business:

  1. Owners/Shareholders
  2. Employees
  3. Customers
  4. Community
  5. Government
  6. Environment

We consistently focus only on 1. Owners/Shareholders if that is the only metrics that matter, then we have a wrong paradigm or an unsustainable system. VC funds are businesses and they need to get sustainable just like any other business. I think the fundamental problem with us humans is that we let entropy get the better of us. What I mean is based on the work of Dr.Scott Peck and Dr.Steven Covey, Scott Peck in his very popular book “The Road less travelled”, talks about Love – “Love is the will to extend one’s self for the purpose of nurturing one’s own or another’s spiritual growth… Love is as love does. Love is an act of will — namely, both an intention and an action. Will also implies choice. We do not have to love. We choose to love.” He goes on to say the antithesis to love is laziness, all of us are lazy, not the kind that we typically associate with, but according to Dr.Peck Laziness is the unwillingness to extend oneself to the betterment of the self or another’s spiritual growth. If all of us extend ourselves to service every stakeholder in our relationships, we will fix the problems in our world. The same philosophy works for the VC business as well. The big challenge VC’s face is the ever increasing pool of money that they continuously deploy or need to deploy, I think that notion has to be rethought. Can you make a fund sustainable? theoretically I think it can, I am not that smart to figure out how to fix this problem. What if a fund investing in a portfolio of companies made all the companies sustainable to a point where they consistently keep increasing their book value… is’nt that what Entrepreneurs do or want to do? why cannot a fund do the same? why do we have to keep raising more and more capital to run the VC business? I don’t know enough about this to judge the players but I fundamentally don’t think this is impossible to do. The real emphasis that I want to make in support of the VC business is that, I have redefined the acronym VC – to me VC stands for Value Creator, as long as you are able to create value that creates a system that feeds itself you can make any system work. Sure there are challenges, it takes a lot of work, have to make a lot of sacrifices, it is full of pain but it is so worth it. I have written about the Why we do what we do… all VCs should do the same thing every entrepreneur needs to do, stand in front of the mirror and ask themselves “Why do I do what I do?”

I think for the first time in a long time all businesses are being faced with the challenge of dealing with competition and tectonic shifts in technology that disrupts traditional methods of measure, improving and servicing owners stakeholders. VC business is not immune to this change we are seeing. I always go and listen to Bob Dylan’s

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