The Valley of Death and other Historical Notes about Venture Capital.

This exciting and risky venture capital world is a business of adversity for both the entrepreneur and the investor. Most will go through the Valley of Death at least once.

As Buckminster Fuller once wrote, “Sometimes I only find out where I should be going by going somewhere I don’t want to be. Prior to becoming successful, vc investments go many places most people would rather not be. Click To Tweet

Creative business development often depends on being unreasonable.

And So, a Bit of History

From 1995 to 2000, the online web boom and bust tested the limits of the unreasonable and the ability of both entrepreneur and venture capitalist to survive. The sky-­high public and private company valuations caused both entrepreneur and venture capitalists to lose their moorings and to pour capital into a number of misguided ventures.

The inevitable bust killed both good and bad ideas and companies equally impartially.  It also created the beginnings of a real-world education for the next generation of entrepreneurs and venture capitalists, as well as helping begin and fuel the rapid expansion of the Internet, which was in a few short years to change everything.

The combination of now-­bloodied and experienced entrepreneurs and venture capitalists, with the ability of the Internet to facilitate rapid and less capital-­hungry company funding, led to the next creative company boom—once the web bust of 2000 and the economic crisis of 2008 had blown themselves out. Those left standing now knew the game and the score, and were ready for the next turn of the wheel.

Crawling Back from the Red

From 2000 to 2012—over a decade—venture capital returns were negative and few ventures went public. Entrepreneurial dreams of being rich beyond the dreams of avarice became mostly nightmares.

Finally, along with the economic recovery the stock market took off and recouped its losses. As always, this market upswing released the mother’s milk of venture capital and entrepreneurship: the initial public offering (IPO).  Venture Capital once again began to flood the start-up, middle and later stage VC markets. Company valuations hit new highs and talk of another bust grew, although things seemed different than in earlier periods.

Capital to fund start-­up and later-stage ventures was now coming not just from institutional venture capital sources such as pension funds, but from individual investors in full force. Led by the creation of online funding portals (crowd funding), individual investors were chasing yield through investment in venture capital.  At first the crowd funding sites were not permitted by SEC rules to sell stock, so they gave away tangible yet inexpensive “prizes” that everyone “won,” as if out of a box of CrackerJack, and investors came in droves.

The (not Steve) JOBS Act

Congress, seeing a good thing, then enacted the JOBS Act, short for the awkwardly named Jumpstart Our Business Startups Act, with bipartisan support. Now accredited investors could invest in venture capital and entrepreneurs can offer their stock online without the costly and time­consuming need to be a broker/dealer.

  • A single investment offering also could be floated both online and offline to up to 2,000 accredited investors.
  • A further provision mandated the SEC to devise further rules permitting non-­accredited investors to participate, with certain limitations, in entrepreneurial ventures.
  • Some of these new rules were just issued (as of this writing) by the SEC relating to Regulation A offering. I’ll discuss the implications for entrepreneurs and venture capitalists in my next VCapital blog.

The torrent of capital unleashed brought wary entrepreneurs back into the game and led to the creation of tech centers, accelerators, incubators, angel investment groups and all manner of new forms of venture capital investment deployment and organization. The seeding of new ventures received significant capital and much attention as the Internet permitted the creation of companies with less capital requirements and potentially faster exit timing from start to finish.

The venture capital industry, while fueling innovation for many years, had not really innovated its own business model since inception.  One form of innovation was the creation of online venture capital investment firms under the provisions of the JOBS Act.  Freed from the requirement to be a broker-­dealer, these early innovative online VC firms such as Our Crowd (Israel), Funders Club (Silicon Valley), Angels List (Silicon Valley) and Circle Up (Silicon Valley) sought capital from accredited investors often with minimums as low as $1000 to invest in start up and Series A venture capital investments.  By year‐end 2014, over $300 million was invested by these new age venture capital firms.

Time Again for Something Ahead of its Time

The first VCapital (Let’s call it v1.0) was formed as an online venture capital firm in 1995. Now, 20 years later, the time is right to launch VCapital v2.0. VCapital offers accredited investors the opportunity to invest in high-­quality, professionally managed and vetted venture capital offerings—the type of world-­class VC investments that were previously available exclusively to institutional investors.

VCapital’s focus is particularly on those investments needing $500,000 to $5,000,000—generally the Series A offering (although seed, start up and Series B will also be considered). Participants are encouraged to invest meaningful amounts with a minimum of $50,000 in the VCapital diversified pool or directly in specific investments.

VCapital is not “crowd funding” in the sense of throwing money against a large number of opportunities to see what sticks. There are no t-shirts or movie tickets that come with every investment. Instead, VCapital is high-­quality, professionally vetted opportunities, identified by one of the country’s most successful venture capitalists for over three decades and his team.

We are venture capitalists in the business of creating world-­class companies, not trying out a flavor-­of-­the-­month or riding a wave of irrational stock market exuberance.

  • VCapital is Old School in its search for fairly priced investments with high-­potential returns for its investors.
  • VCapital is New School in offering full transparency, institutional quality for accredited individual investors, and online efficiency at a lower price than traditional institutional venture capital.

Welcome to VCapital. I invite you to join us for the best of the best, and may all your investments prosper.

—Len Batterson,
Founder, Chairman and CEO, VCapital