Yes, it was argued at last week’s International Business Forum venture capital investing conference.
Too big a fund makes fund managers engage in sub-optimal investments because they have to find a home for the money and there aren’t that many good VC investments around.
Judith Elsea, a co-founder and managing director of Weathergage Capital, said she doubted that there are enough promising companies for a $3 billion fund to get a three-times return.
Jessica Reed Saouaf, managing director of Hall Capital Partners, said that some VC firms “look a lot more like asset management firms than they do like venture capital firms.”
George Arnold, a managing principal at Knightsbridge Advisers, thought $50 million VC funds were the most promising vehicle.
However, this common sense may well have been engendered from the halving of US investment money for VC funds between Q108 and Q109.
And common sense, of course, never lasts long in the face of a seductive trend.
Nicole Belytschko, director of private equity for C.M. Capital Management, said that when the IPO market returns, bringing big returns with it, then all bets are off as the investment money floods in.
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