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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