VCs Whining About Too Much Money... Again

from the oh,-boo-hoo dept

Back in January we noted that the top tier VCs were out there complaining that their lower tiered competitors were raising too much money and harming the overall VC space. It seems those complaints are only getting louder. For the past year or so, many VCs I've spoken to have been pointing out the same thing. Despite the dot com bubble popping, institutional investors are still shoving each other aside to give VCs money. They have a certain amount of money they want to put into risky investments, and they have no other place to put it than VCs. So, every VC firm heading out to raise money is finding themselves deluged by plenty of investors who want to put in way more money than the fund can handle. Thus, these top tier VCs start whining that the lower tiered VCs will end up with that cash, flooding the market. Then, they're afraid that they'll no longer have easy pickings on ripping off the top startups while earning their cushy management and carry fees. What's most amusing, of course, is that for many, many years, these same top VCs tell story after story about how startups should sign on with only top tier VCs because of all the help they give them to make them a success. If that's the case, why should they care if the lower tier VCs have cash? If what they've been saying is true, it shouldn't matter, because the lower tier VCs won't be able to help turn startups into a success like the top tier guys. Having too much money is only a problem for a VC firm in a situation where the VC firm itself has little impact on the success of a firm. Basically, all this is doing is making the VC world a little more competitive, and that should force them to do a better job (though, not to stop whining). As we've pointed out in the past, while bubbles may be bad for investors, they can often be good for consumers, so don't buy the VC hype.