Tim O'Reilly Asks If Venture Capital Is Doing More Harm Than Good
Tim O'Reilly is the founder of O'Reilly Media (formerly O'Reilly & Associates), and is credited by Wikipedia as helping to popularize the term open source. But Techcrunch reveals what he's learned about venture capital from his work with Bryce Roberts (O'Reilly's investing partner at early-stage venture firm O'Reilly AlphaTech Ventures). "At a minimum, O'Reilly — who bootstrapped his own company, O'Reilly Media, 42 years ago and says it now produces 'a couple hundred million dollars in revenue' yearly — provides a lot of food for thought." Tim O'Reilly: The typical VC model is looking for this high-growth company with exit potential, because it's looking for this big financial return from an IPO or acquisition, and that selects for a certain type of founder. My partner Bryce decided two funds ago [to] look for companies that are kind of disparaged as lifestyle companies that are trying to build sustainable businesses with cash flow and profits. They're the kind of small businesses, and small business entrepreneurs, that have vanished from America, partly because of the VC myth, which is really about creating financial instruments for the wealthy... The talent pool is just much greater [when you look outside of Silicon Valley]. There's a certain kind of bro culture in Silicon Valley and if you don't fit in, sure [you could find a way], but there are a lot of impediments... I've been really disillusioned with Silicon Valley investing for a long time. It reminds me of Wall Street going up to 2008. The idea was, "As long as someone wants to buy this [collateralized debt obligation], we're good." Nobody is thinking about: Is this a good product...? It's part of the structural inequality in our society, where we're building businesses that are optimized for their financial return rather than their return to society.
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