Fred Wilson on the Future of Venture Capital

Fred Wilson thinks that Venture Capital is changing -- in 25 years, VCs may not have any assets under management.


Last night, Sarah Lacy asked Fred Wilson 'The Thiel Question' - something that Peter Thiel commonly asks prospective investments: "What do you believe that very few people agree with you about."

Wilson's answer was that in the venture capital market, there ultimately wouldn't be a need for VCs to ever have funds.

Today, VCs raise money from Limited Partners (LPs), who trust the VCs to use that money to invest in companies that will have amazing growth over the next 3-10 years and deliver a good return on investment.

The VCs primary value provided is to source and structure the deal and then provide ongoing advice and guidance to nurture the investment. By contributing money to the VC Fund, the LP is simply betting that the VC will be capable of sourcing and structuring deals and then nurturing them to success.

Storing Limited Partner money in their bank account, just waiting to invest it is inefficient for VCs. Instead, VCs should be able to submit, on a platform like AngelList, the investment terms, company overview, and personal commitments. Once it's up, we can easily let the market provide the money ad hoc.

Wilson's right, this future seems logical and inevitable. In fact, AngelList is already starting to successfully provide this type of disruption in the seed investment market via their Invest Online feature.

As a new angel investor, I've joined this market at a very interesting and disruptive time in it's life. As Naval Ravikant would say, "we're witnessing the unbundling of advice, control, and money."

In a world where advice, control, and money become unbundled -- the money will become a commodity chasing those with the best reputations for success.

Therefore, the Fred Wilson of 2040 will want to focus primarily on giving great advice and helping guide the company responsibly from his perch on the board.

Fred Wilson said he thinks this change will happen decades from now, but, it's already starting to happen for very early-stage investing. This won't happen quickly, but expect to see more and more "out-there" experiments.

If you are interested in early-stage investing one day, it's worth noting that building your expertise and brand will matter significantly in the future. It's why entrepreneurs will pick you today and it's why money will follow you tomorrow.

Photo:  Some rights reserved by Joi

​There are two kinds of failure – but only one is honorable

Malcolm Gladwell teaches "Get over yourself and get to work" for Big Think Edge.

Big Think Edge
  • Learn to recognize failure and know the big difference between panicking and choking.
  • At Big Think Edge, Malcolm Gladwell teaches how to check your inner critic and get clear on what failure is.
  • Subscribe to Big Think Edge before we launch on March 30 to get 20% off monthly and annual memberships.
Keep reading Show less

Vikings unwittingly made their swords stronger by trying to imbue them with spirits

They didn't know it, but the rituals of Iron Age Scandinavians turned their iron into steel.

Shutterstock
Culture & Religion
  • Iron Age Scandinavians only had access to poor quality iron, which put them at a tactical disadvantage against their neighbors.
  • To strengthen their swords, smiths used the bones of their dead ancestors and animals, hoping to transfer the spirit into their blades.
  • They couldn't have known that in so doing, they actually were forging a rudimentary form of steel.
Keep reading Show less

Why the ocean you know and love won’t exist in 50 years

Can sensitive coral reefs survive another human generation?

Videos
  • Coral reefs may not be able to survive another human decade because of the environmental stress we have placed on them, says author David Wallace-Wells. He posits that without meaningful changes to policies, the trend of them dying out, even in light of recent advances, will continue.
  • The World Wildlife Fund says that 60 percent of all vertebrate mammals have died since just 1970. On top of this, recent studies suggest that insect populations may have fallen by as much as 75 percent over the last few decades.
  • If it were not for our oceans, the planet would probably be already several degrees warmer than it is today due to the emissions we've expelled into the atmosphere.
Keep reading Show less