Ehrenberg: Some, But Not All, VC Firms Will Die

How long can this venture capital dog and pony show last? That’s the question on the mind of IA Capital Partners’ Roger Ehrenberg, who forsees a proliferation of venture capital firms even as some of the biggest names wither and die.

He separates venture firms into three categories: Micro VC, Life-cycle VC and Growth VC. Micro VC funds invest in startups at the seed stage; life-cycle funds carry through beyond the seed stage into Series A, B and C; and growth VCs act like a combination of venture capital and private equity investors, deploying more money but taking on less risk than the micro and life-cycle funds. He sees the money distributing along a curve, with assets under management accruing mostly to life-cycle VC funds:

I expect to see the greatest AUM [assets under management] in Life-cycle VC, with Micro VC and Growth VC being smaller but critical elements of the venture marketplace. Regardless of the poor 10-year returns, the venture capital industry is alive and well, and an essential catalyst of innovation in our country and across the world. […] A healthy and growing body of new, carry-focused funds will rule the day, which is why the Micro VC and Life-cycle segments of the venture landscape are so exciting and hold such promise.

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