Will Outsiders Shake Up VC?

I had a chat with two friends yesterday about the venture capital (VC) industry. One works in the industry and the other is entering it. We debated the difficulty of breaking in to the industry, the challenge of getting capital if you’re a founder outside the VC network, gender issues, and a few other things.

One of my friends pointed out something that stuck with me. He said VCs that have been successful have accumulated unheard-of amounts of wealth at young ages (relative to historical norms). They’ve achieved this success using a particular playbook. There are certain parts of that playbook that people might not like and that are under fire now. But why change what you’re doing if it’s working so well?

If you look at the history of venture capital, you see that the industry changes when it’s forced to. Said differently, when its economics are threatened, the industry reacts. Masayoshi Son and Chase Coleman are examples of outsiders whose unusual approaches affected industry returns and caused the industry to adapt.

It’s interesting that for all the disruption and innovation VC brings about in other industries, VC itself doesn’t evolve and innovate at a faster pace. The world has changed a lot since March 2020, and I think the VC industry hasn’t innovated enough to keep up with all the changes. I think we’re due to see another wave of changes to the industry caused by outsiders.