How to 'Fix' the Venture Capital Model? Regulation versus Disruption

Abstract

There is something special about venture capital. And this “special something” goes beyond the large financial returns that can come from investing in successful start-ups. At its core, venture capital is about identifying the life-changing innovations of tomorrow and then facilitating the development and deployment of those innovations today. As such, venture capital is in the business of changing the world. This is not to downplay the central role of entrepreneur-founders in developing the underlying technologies, creating and scaling a business, and improving people’s lives, but rather to acknowledge the central role of venture capital in this process. Stories of successful start-ups in a U.S. context – think Amazon, Facebook or Google – all contain one recurring feature: the crucial support of one or more venture capitalists.

However, doubts relating to the venture capital model have been emanating from all corners of the start-up ecosystem for over a decade, raising concern that the whole model is broken. The answer is simple: the venture capital industry should also adapt to new circumstances and a rapidly changing (digital) environment.

Keywords: Blockchain, Corporate Venture Capital, Corporate Venturing, Decentralization, Digital Transformation, Ecosystem, Entrepreneurship, Fundraising, Limited Partner, Social Media, Start-up, Storytelling, Venture Capital

JEL Classification: G18, G24, G34, K20, K22, L20, L22, L26, M21, O30, O31, O35, Q55