Saturday, July 21, 2007

Wired Blogs: Mike Moritz: The S&P 500 Beats 80% of Venture Funds

"Sequoia Capital's Mike Moritz, the uber-VC who earned his reputation backing Google, Yahoo, eBay, Cisco and Apple, was pessimistic about the future of the venture capital industry at a Fortune-sponsored conference Friday. "People would be far better off investing in an index fund," rather than putting their money into a VC fund, Moritz claimed, estimating that fewer than 20% of VC funds outperform the S&P 500.

That goes a long way towards explaining the low regard that many entrepreneurs have for VCs (privately, of course). The venture business has been having a hard time in the tech sector lately, forced to compete with angel investors for smaller deals ($1 or $2 million instead of $10 or $20 million) and making up the difference by funding dozens of early-stage startups where before they'd invest in just a handful of later-stage companies."

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