The Venture Capital industry is splitting into various segments to serve different “customers,” much like the car companies expanded their product line in the early days of their industry.
So says Chris Dixon, Cofounder of Hunch, an online recommendations site based in New York City, and an experienced investor in early-stage technology companies such as including Skype, Foursquare, Stack Overflow, TrialPay, DocVerse (acq by GOOG), and others. Dixon’s article was picked up recently by BusinessInsider.com
The surplus of venture capital firms today has generated more competition and allowed entrepreneurs to become more selective as to who to partner with. As a result, venture capitalists have become more specialized. They have segmented their services either by industry (IT, cleantech, healthcare, etc.) or by the four distinct stages in the venture financing process.
These would be: 1) Mentorship programs such as Mountain View CA-based Y Combinator, which helps startups form teams and launch initial products; 2) “Super Angels” who provide seed capital and guidance to startups, to hire employees, further develop the product and launch marketing programs; 3) Traditional venture capitalists, such as Sequoia Capital and Kleiner Perkins Caufield & Byers, that offer broad networks to help with sales, business development and scaling up the business; and finally, 4) Accelerator funds that focus on preparing successful startups for an IPO or strategic acquisition.
Dixon notes that in the past, VC firms played all these roles as “lifecycle” investors. But today, the move is toward specialization. It may seem an uncomfortable trend for some in the industry but he sees it as a natural evolution.
How about you? Do you think this trend toward segmented roles within the venture capital industry is good for business? What affect will it have on your venture capital career? Add your comments below.
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