The venture capital model might not be completely broken, but the chairman of the National Venture Capital Association says it needs to be fixed.
With only six venture-backed IPOs in 2008—the worst showing since 1976—NVCA chairman Dixon Doll says the venture industry needs to help restart stalled capital markets. Doll says the Virginia-based NVCA is preparing an initiative to restore the system by overhauling the pipeline for exciting new stocks, the venture capital industry. The recovery plan, which the NVCA plans to release in the next few weeks, includes recommendations for Congress and the VC industry as a whole.
Doll, a co-founder and general partner of Menlo Park, CA-based DCM, outlined the initiative in a breakfast presentation yesterday at the San Diego Venture Group. The session, billed as a venture capital outlook for 2009, drew more than 450 people.
“There are too many small companies out there today,” Doll told the crowd, “Our industry has not produced as many transformational companies in the past few years as it did in the previous decade.” He later suggested, “VCs need to be much more aggressive in consolidating companies…even within their own portfolios.”
Doll was outspoken about VC practices, saying the limited partners that invest in venture firms “are fed up with the mediocre returns.” He suggested that one way to improve investment returns is for VCs to stop investing in the underperforming companies in their portfolios. Doll was hardly alone, though, in criticizing VC performance during a panel discussion that included Amir Nashat, a general partner with Polaris Venture Partners in Boston, and Victor Westerlind, a general partner at RockPort Capital in Menlo Park, CA.
“To pretend that the world hasn’t changed
