The altruistic purpose of venture capital?

I’ve been doing a lot of reading lately about start-ups and the various processes that venture capitalists use to filter out investment opportunities, and I have to admit that my opinion of them as a source of start-up capital is changing.

Whilst riding the dot-com boom and bust cycle venture capitalists got a pretty bad name. I distinctly remember standing at the water cooler talking to colleagues about how company X was funded to the hilt and had no plan to turn that investment into some kind of return. It happened so many times (resulting in the crash) that I started to think that VC’s were to blame.

These days my opinion has mellowed a little bit and I can start to see a somewhat altruistic side to the whole venture capital game. A large number of VC dollars are spent on enterprises with some kind of technological aspect, because of this I suspect (although I have no hard numbers on this) that a large number of people on the receiving end come from a technical background.

So what draws so many geeks towards entrepreneurism? Well, I think it has something to do with this:

The “cube farm” seems to be the default configuration for most enterprises today and when you put a geek with an ounce of talent in one they are going to start hatching escape plans. Venture capital offers geeks with a good idea an escape plan.

So – that is the alruistic purpose of venture capital, to allow geeks with an idea to get out of the cube farm and start following their dreams – if they are brave enough to do it.

Not Quite Altruistic

OK – so venture capital isn’t some charity program. The benefits flow both ways. By hatching geeks from cube farms VC’s are building the talent pool that they need to rely on. Sure there will be some failures which is why it is important to surround that geek talent with a good team but assuming that something gets off the ground that same team is going to be a better be the next time around.

And eventually, once the geek has earned enough they might decide that they want to be the backer for venture capital. There is an eco-system here I think.

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