Friday, May 15, 2009

VC May Be Obsolete for Startups - But Not In Cleantech

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.

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