Venture Capitalists: the slash-and-burn artists of technology

Eventually the generation that Fred Wilson [of Union Square Ventures] leads will fall behind, as did the one led by John Doerr at Kleiner-Perkins. What they will be replaced with is one that is not only aware of the usability of products, but also has a sense for the flow of open technologies to fuel the ecosystem. These VCs will make side investments in technologies that are not intended to produce an IPO or acquisition, rather are intended to produce a new layer of technology that a whole generation of startups can feed off. At the same time, some percentage of each fund will be plowed into programs designed to generate the next layer after that.

The VCs will tell you that it’s not their business to fund innovation for the sake of innovation. That’s as short-sighted as saying that an oil company wouldn’t invest in exploration or research into new extraction methods. Or if you got good service at a restaurant you wouldn’t leave a 15 percent tip. Of course you don’t have to do either. But if you don’t do some exploration or leave decent tips, you’ll be out of business one day, or get hot coffee spilled in your lap.

I’ve always felt that as long as Moore’s Law is operating, and it shows no sign of letting up, that we aren’t doing our jobs if the tech industry isn’t tracking its growth in a linear fashion. The boom-bust cycle is a product of the lack of vision of the VCs. Or our over-reliance on VCs to lead the investment decisions of the tech industry.

This post by Dave Winer is interesting because of its rarity. Insiders in the technology industry rarely write or talk in public about venture capitalists, probably because they think they might need them some day. Or they believe in appeasement (defined by Winston Churchill as “being nice to a crocodile in the hope that he will eat you last”.) As a result the public has a peculiarly rosy — and misleading — impression of them. There are, of course, good VCs: I know a few. But there are an awful lot of creepy, destructive ones too. One of the lovely stories in Michael Lewis’s great book about Jim Clark concerns Clark’s decision to exclude from the Netscape IPO the VC who had screwed him at Silicon Graphics. The guy committed suicide as a result, and I remember thinking at the time that it looked like a fitting conclusion to a sordid career.