Adding fuel to Fred Wilson’s recent point concerning Venture Capital’s math problem and there being too much money going into the asset class, at the NVCA’s convention this week Rebecca Connolly, of Fairview Capital (a Fund-of-funds with $3 billion under management and 70% of that being allocated to Venture Capital) gave a talk were she said:
I hope some of you go out of business. I hope that does happen. Let’s just flush everything out and get back to less competition, less money…just not my funds.
To be fair though, while LPs are enjoying their moment in the sun of talking tough and “leveling the playing field”, they’re the ones who gave the underperforming funds money to begin with. There’s plenty of blame to go around. Ultimately if the LPs do their job right, the “bad” firms will fade away as the meritocratic elements of the industry won’t enable those in the lower rungs to raise more funds.