The UK Venture Capital industry has become the latest to thrust its hand out for a £1 billion bail out claiming that it is “potentially a lost generation of companies.”
Why? Well, as we predicted, the reason is that VCs cannot get exits and cannot raise fresh capital for their current portfolio companies, something that may have been buried in the small print of the term sheet. As a result many companies cannot raise the second or third rounds of financing that they were expecting and may go to the wall. The industry as a whole is now demanding that the UK government fork over a wad of cash so that they can continue to take their management fees continue funding innovation.
The implicit threat is that without that investment, a whole raft of companies developing clones of Facebook and Twitter may be lost forever. Instead of bemoaning this we should be shouting hooray! How many billions of dollars have been ploughed into “me too” investments by people who can’t see beyond the narrow confines of Web 2.0? ? It’s hardly innovative now, is it?
As I discussed last month, the VC industry is becoming a bit of a lame luck. The world has changed, quite fundamentally, and ploughing on with a business model that clearly does not work, either for investors or entreprenueurs doesn’t seem a very sensible course. Rather than handing out public money to fund unsustainable businesses, we should be waking up to the new economy and making sure that any resources are ploughed into taking advantage of the future, not applying sticking plasters to a half dead industry.