Adeo Ressi, founder and proprietor of TheFunded.com, made waves this week, after the PowerPoint slides of a private presentation he gave was leaked to bloggers. peHUB has asked Adeo to expand on the presentation, and to give a fuller understanding of what his slides were intended to present. We thank him for the contribution:
"The Canary is Dead" presentation was delivered to a group of Harvard Business School professors to encourage classroom dialogue about better models for venture capital, before students graduate and enter the workforce with bad training.
The Model is Broken
Investing in growing companies has proven to be economically and socially rewarding to a broader society. However, the venture capital model of delivering preferred equity investments in the $1 to $15 MM range is broken for three specific reasons. First, over 90% of companies that require investment in this range do not receive the capital they need, because they are rejected by the model, discouraged by the process or unaware of the rules. Second, the process of raising the capital has anecdotally proven to destroy shareholder value through enormous time commitments, significant legal fees and deteriorated morale. Lastly, the venture investment model, in its current form, does not generate returns for any of the stakeholders when examined in aggregate or on average.
Despite this broken framework, the venture capital model has resisted change. More and more money has flowed into venture capital, and partnerships continue to receive the same management fees and economic rewards. The bursting of the Internet bubble eight years ago was an obvious