Heat death: Venture capital in the 1980s by Jerry Neumann

TL;DR - The current VC landscape is more like the 1980s (risk-averse) than the 1990s (bubble). The key lesson of the 1980s is that VCs need to take big risks on new markets to succeed.

Helpfulness - 5

Tags - history, development, early vc

Questions addressed:

  • What was the venture capital landscape like in the 1980s?
  • How has it evolved and how is it similar or different relative to today?

Summary:

  • The 1970s saw little venture activity due to a struggling economy.
  • In the early 1980s there was a boom in VC investment and IPOs, with higher competition for investments leading to earlier-stage funding by VCs.
  • In the late ‘80s VCs began funding later-stage companies and pursuing LBOs rather than seed funding due to poor returns (also shifted from tech to retail etc).
  • The internet revived VC in the 1990s.
  • Not every cycle is a bubble: ‘90s were, but ‘80s were not (just a lack of risk-taking).
  • Today is similar to the 1980s: VCs are not adequately investing in market risk.

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