Is Venture Capital bad for business and consumers?

Posted by Tom Blue on February 26, 2009 under Companies, Funding, Investing, Technology | Be the First to Comment

I want to prefice this by stating I am not a vc hater.  I have thought about getting venture capital financing in the past and I realize that limiting private financing is silly…. but I just had a thought today.  What would happen if venture capital did not exist?
Let’s say that startups could only spend $100K to get them off the ground and after that they would have to survive off their cash flow.  You know, the old school way.
#1 Most products and services would really improve.  Not only would companies have to create something that really worked well from their launch, but it would completely level the playing field.  There would be a lot of competition which would drive better solutions
#2. You would immediately know if the business model was viable or not.  During the last tech boom cycle, VCs just threw money at companies trying to shoot for the moon… market share was more important than profits.  Then in 2001, all of the sudden, profitability was everything. Numerous companies folded.  This cycle is repeating itself again right now… profitability is again, in vogue.  If cash flow positive was always the goal much time and money could be saved.