Umair Haque / Bubblegeneration
umair haque  

 
 


Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.


 
Friday, September 24, 2010

What You Can Learn From Silicon Valley's Mistakes


So, by now you've heard of Angelgate. Yawn. The real problems in the ventureconomy are bigger, wired into the DNA, hidden in plain sight.

Consider deal "syndication". Yes, venture investors need to manage risk. By parcelling slices of deals out to their pals? Sounds a little 18th century to me. Why not a futures market for venture finance - a real risk transfer mechanism? What's stopping that kind of real, institutional innovation?

The problem's this. The ventureconomy is just about the least efficient mechanism for igniting innovation imaginable: it's an old boys' club. In econ 101, we'd probably call it "crony capitalism" (and that usually tends to stop meaningful investment dead in its tracks, fuelling misallocation and disinvestment instead).

From an economic perspective, it's little different from most industries. An oligopoly that's run by a handful of dudes with preferential access to capital and relationships. Replace "big evil companies" with "sluggish, imaginationless funds", and you get the picture.

A 21st century ventureconomy, just like other 21s century industries, will be built markets, networks, and communities. Ask yourself: why aren't there transparent markets for venture finance? Liquid networks to let resources be shared, pooled, and remixed amongst aspiring entrepreneurs and seasoned investors? Transparent, self-organizing communities to pool, aggregate, and filter knowledge, access, and even investment ideas?

If Angelgate says anything, it's this. The "superangels" are replicating the 20th century ventureconomy, at a slightly smaller scale. The institutions are the same - and hence, a new old boys' club is taking shape. Yawn.

The real question for Silicon Valley 3.0 is: who can think beyond "funds", "product", "revenues", and "scale"? Who can move beyond merely making another old boys' club - and structurally reshape the ventureconomy, with liquid, open, transparent, accessible markets, networks, and communities?

Without it, the Valley's long, steady decline (hi, IPO window that never opens) is sure to continue. Because yesterday's approach to financing, seeding, and managing stuff is too inefficient, unproductive, self-destructive, rife with conflicts of interest, myopic, and simple ineffective to last.

And because that lesson applies to, well, everything, that's what you can learn from Silicon Valley's mistakes.

-- umair // 12:24 PM // 2 comments


Comments:

Excellent post. I'd also add that the SV VC/angle mafia exploits its preferential (and incestuous)relationship with the tech media and so-called "visionaries" as well. The masses are "told" what the next new big thing is, thus overhyping a whole bunch of mediocre investments for the gain of a few. Classic pump and dump, with the technorati complicit in the deception.

A "where are they five years later" analysis of many of the SV darling companies of days gone by would bear out the vacuous and shallow nature of many of those investments.
// Blogger RickBullotta // 1:36 PM
 

Interesting post Umair and excellent comment Rick.

What's your take on the rise of the mentor-led accelerator model, Umair? (Y Combinator / TechStars / Seedcamp et al.)

And do you have any thoughts on how the early stage support and financing of Startups could be improved?
// Anonymous Kim // 11:52 AM
 
 

Recent Tweets







    input
    portfolio
    contact

    mail.
    uhaque (dot) mba2003 (at) london (dot) edu

    skype.
    umair.haque

    atom feed

    technorati profile

    blog archives