Is venture capital becoming obsolete for Web start-ups?
Yes, according to Robert Hendershott, a professor of private equity and entrepreneurship at the Leavey School of Business at Santa Clara University.
“Potentially, the venture model for finding, developing and vetting new Web-based businesses breaks down,” he writes.
The venture capital model evolved to start and expand capital-intensive semiconductor companies. “Without resources beyond the reach of most entrepreneurs it simply wasn’t possible to create a new semiconductor company, or even an Internet company,” Mr. Hendershott writes. Now, Web start-ups are routinely started for less than $50,000.
He acknowledged that even if Web start-ups depend less on venture capital, other technologies, like clean tech, biotech and software, still need venture capital, and most firms invest in a variety of start-ups.