Venture Capital Industry In Distress
According to Peter Cohan, President of Peter S. Cohan & Associates,
a third to one-half of the 882 active venture capital (VC) firms
could disappear, if only because of poor returns.
Five year VC returns through 2008 were 6-percent compared to
48-percent in 2000. Under-performing firms are likely to close their
doors. Meanwhile, investment in VC funds shrank 39-percent to $4.3
billion in the first quarter from $7.1 billion in the same quarter a
The venture capital business got started back in 1957 when American
Research and Development (ARD) invested $70,000 in exchange for
70-percent of the now-defunct Digital Equipment Corp.
DEC was founded by MIT grad Ken Olson. It took the lead in mini
computers and was a dominant information technology company through
much of the 1970s and early 1980s. In 1972 ARD sold its stake for a
70,000-percent (yes, 70,000%) return!