There Are Two Venture Capital Industries

I attended a breakfast meeting the other day where David Silverman of PWC presented the latest Money Tree data on the venture capital business to a room full of entrepreneurs and VCs.

As I sat there and listened and read the charts, it occurred to me that there are now two distinct and very different venture capital businesses.

The first VC industry is investing in software based businesses. The software VC business has been fundamentally altered by the massive decrease in the cost of building and launching a software based business. I don't think I need to explain why this massive decrease in cost has happened to this audience. We've talked about that ad naseum here and on other tech blogs.

The second VC industry is investing in cleantech, biotech and other capital intensive tech businesses that have economic models that have not been fundamentally altered. This VC industry operates largely the same way it has operated for the past twenty or thirty years.

I've asked David to help me put together some numbers that will show this breakup of the venture capital business. I hope to get the numbers in the next few days and will be posting them and some additional thoughts on this topic in the coming weeks.

I don't think you can make blanket statements about the VC business anymore. These two industries are very different from each other and will have very different business dynamics and risk and return characteristics going forward.