The ouroboros, an ancient symbol depicting a snake eating its own tail, often symbolizes introspection, the eternal return or cyclicality.
When I saw this article about how the disrupters in the VC industry are themselves ready for disruption I immediately thought of the ouroboros. Like the cyclical snake eating its own tail, some think the VC world is slowly being changed by entrepreneurial developments in its own field. Many smaller funds are popping up outside of Silicon Valley, writing smaller checks and offering more personalized guidance than the larger, more established VCs. But, this is okay because the way things stand, venture funds have been consolidated and cut down to a few larger funds over the last decade. The high concentration of the VC funds in few geographic areas means that it’s tougher for businesses across the globe to get funded. Furthermore, the amount of support needed from VCs to get a company to grow does not scale with investment size. So, these mega-funds that invest millions are now shifting towards more established startups that will need less guidance, and, in a way, are helping to exacerbate the problem of startups that need it not having access to funding.
Another article released earlier this week suggests that venture capital, as we know it, is dead. Despite VC investment value rising 15%, overall VC activity is down over the past two years. And, the uptick in value is primarily due to larger rounds put towards more established startups. Again, this defeats the purpose of true venture funding. However, the last year has been almost record-breaking for raising funds. Why is that? The author in the article linked above has an interesting point: “the VC industry is evolving into a private hedge fund industry, raising larger funds and investing larger amounts in late stage companies that are well past the innovation stage.” Basically, “unicorn hunters” aka rich dudes who want to get into tech from the ground up are investing in funds hoping to get in on the next Uber / Google / Apple / etc., but because the VCs are (allegedly) only looking for the return and not developing a fledgling business, new companies are iced out.
So, are the smaller VCs enough to disrupt this industry? Brock Pierce of Blockchain Capital has other ideas. Inspired by video games that offered virtual equipment to their players he set up a VC fund made of bitcoin and other cryptocurrencies, allowing his firm to issue virtual VC tokens. (Get a more detailed look here and here.) While the regulations and institutional guidelines are still being set in stone, Pierce thinks that this move is the first step in revolutionizing the VC industry. After all, according to Pierce, “the VC industry has benefitted greatly from technology and the internet… so I can sit around and wait for someone to disrupt ourselves, or we can choose to disrupt or cannibalize ourselves.”
Personally, I’m interested to see what the next wave of VC will bring. Cryptocurrency is so nuts that it just might work, but will Pierce be able to offer the support that each new company needs to grow, or will his version of the disruption transfer the problem? Perhaps the ouroboros metaphor is more literal in its relation to cyclicality — only time will tell.