Why Do I Believe in Venture Capital 2.0?

In this era of rapid technological advancements and thriving startup scenes, businesses and their funding strategies must adapt to remain pertinent. Even the venture capital sector isn't exempted.

Recently, I read a piece that really pushed my buttons: Article : "VCs Face an Existential Threat: There Are Too Many of Them"

In point of fact, this is why I've opted for writing an article rather than simply repost it with my comments in order to communicate my viewpoint and the way that I do see things.

Simply said;?

The article emphasizes a significant problem for the venture capital (VC) industry caused by excessive economic growth and change.

Starting in the 2010s, it shows how sad the world of venture capital is. That's when a lot of people started investing in new businesses, trying to make a lot of money. Now, there are too many people interested, which is causing worries. Older, more conventional men who have traditionally been in charge of things are probably the ones who are most concerned. These people are worried that the big investors, who are called "limited partners" or "LPs," might start putting their money somewhere else. If this happens, their venture capital firms could be in trouble.

The author of the article proposes one potential solution: limiting the scope of venture capital activity. This would mean that bigger VC firms would stay in business and smaller ones might have to shut down.

I believe that this perspective is misguided. It disregards the fact that the VC industry is evolving and must respond to the modern business environment. Changes are necessary and essential. So, it's not the sector itself that needs a reality check. Instead, it's how the media covers it that needs to change.

Let me set the record straight. I'm neither a venture capitalist nor a venture capital expert. However, I don my badge as a startup expert and ecosystem builder in a developing market. My hope is pinned on the democratization of venture capital and the revolutionary potential that is inherent in the disruption of the sector.

How I see things:

Venture capital is a market in the economy. In the same way that demand changes and evolves, so should the supply side. It is important that the market for venture capital accurately reflects the breadth and variety of entrepreneurs who are looking for funding. New entrants, new models, and new perspectives are required to meet this diverse demand. Therefore, it is becoming increasingly necessary for the sector to have perspectives that are more progressive, innovative, and diversified.

5 Reasons Why Changes Across the Venture Capital Industry Are Appropriate:

1. Disruption in Venture Capital: The venture capital industry is undergoing a transformation as new actors challenge established practices. For instance, VC Lab 's accelerator program is transforming venture capital into a force for good by providing training for new and aspiring fund managers and allowing them to quickly capitalize on capital. This is an innovation in VC practices and an effort to reduce errors and anxiety during the fundraising process. Other examples include crowdfunding platforms like StartEngine are democratizing access to capital, allowing startups to bypass traditional VC channels.
2. Diversity and Ethical Shifts: A more diverse pool of investors can lead to funding for a broader array of businesses. By considering investments in female-led or minority-owned companies, the VC industry becomes more inclusive and reflective of societal shifts. Ethical investments, such as supporting environmentally sustainable startups, are becoming a priority, aligning with the global trend toward responsible business practices.
3. Globalization and Access to Emerging Markets: Traditional VC models are adapting to reach markets like Africa and Southeast Asia, where innovative startups are thriving. Investing in companies like Jumia Group , an African e-commerce platform, demonstrates how VCs can uncover growth opportunities outside conventional Western markets.
4. Technological Innovation: Modern tools such as AI-driven investment analytics are reshaping decision-making within VC firms. Platforms like Kreditech use AI to assess credit risk, enabling investments in underserved populations, further demonstrating how technology can unlock new potentials.
5. Demand for Customization and Personalization: Startups often seek VC partners who offer more than funding. For example, Andreessen Horowitz (known as "a16z") provides not just investment but also strategic guidance, marketing support, and recruitment assistance. This tailored approach reflects a broader trend in business, where personal connection and customization are valued.

See : Portfolio | Andreessen Horowitz (a16z.com)

The venture capital industry is undergoing an ambitious transformation mirrored of broader global shifts. This evolution represents a timely and necessary adaptation, not a crisis. The VC industry can align itself with contemporary business practices and societal values by embracing disruption, diversity, globalization, technological innovation, sustainability, regulatory adaptation, and personalized engagement.

These changes are not only beneficial for the venture capital industry, but also essential for fostering the next generation of entrepreneurs and innovations that will influence the future. The modern VC industry has the opportunity to redefine itself as forward-thinking, responsible, and essential to our global economy.

Please note : my comments on the VICE News piece are not a criticism of VICE News or the author. Instead, they are just my opinion as a startup expert. In any debate, I believe it is essential to consider both the argument and the counterargument, aiming for a comprehensive perspective that incorporates complexity and nuance.