Came across this article through reddit from Giles Bowkett, an entrepreneur type in the US. Interesting in the conclusion on VCs:
The irony is, the biggest disruptive innovation that ever came from the Internet could in fact be open source software, and the old industry it destroys will probably be venture capital.Think about it. Free software and cheap infrastructure basically eliminates the whole raison d’etre for venture capitalists. Companies are cheap to start. All the stuff you used to need millions for is now free. That means venture capitalists just don’t matter any more. It isn’t about being lucky enough to get $5 million in funding; it’s about starting something with the cash in your pocket. If you make something and it’s good enough, the guys with $5 million in funding will come to you, because those guys are basically just money in search of intelligence, and it’s a lot better to be intelligence in search of money. If you’re intelligence in search of money, you’ll choose the best way to get money. The best way to get money isn’t to find some VCs to beg, borrow, or steal from; the best way to get money is to make something people will pay for. So if you’re intelligence in search of money, you’ll make stuff people want to pay for, and you won’t even bother with the VCs, because they need you more than you need them.
My own, personal take? Fat chance. Yes yes, free software is nice and so is cheap bandwidth. But the world runs on money. People cost money. Development costs money. Money money money money. So fine, you’re a super ultratalented uber-geek that shows leadership skills, blah blah blah. Still need to create the thing that people will want to pay for. And unless you’re going to be coding everything yourself, you’ll need to hire people to help you. And you’ll need to pay the accountants to pay the bills. And the lawyers to draft the agreements. And the admin guys to, uh, do the admin. Its not as if a magic sprinkle of open source will all of a sudden obviate the need to invest to build a product – if that were the case, then absence of barriers to entry would quickly reduce what was otherwise a very profitable niche into one that looks less and less desirable – both to entrepreneurs as well as investors, be they VCs or others. And even in the case of two folks setting up shop – Company A who chooses the cheap route, builds a really neat widget (but of course doesn’t have the budget for marketing, promo, etc.) vs. Company B who gets a $10 million first round, uses to ramp up and gets to market in 1/2 the time, establishes critical mass, and basically kills off Company A. Hmmm.
I also don’t agree with the “they need you more than you need them” thing – VC money, as with most things in business, are driven by the market – more VCs chasing fewer opportunities just means the cost of their money will come down, not that they will disappear.
So, long story short, I doubt tech VCs will go away any time soon. Besides, they’re fun guys.