Fred Wilson, managing partner at Union Square Ventures, made his first big deal with an investment in the Web community GeoCities, which Yahoo bought for about $3 billion in 1999. He went on to back startups including Twitter, Zynga, and Foursquare. However, he worries the industry is in trouble. Lately VCs haven’t come close to generating the returns on their investments that they were making in the 1990s, according to Technology Review.
IT firms are finding it cheaper than ever to start their companies and many alternative funding mechanisms are proliferating. Also, VCs tend to stay away from ideas that take too long to come to fruition, which includes many in energy and biomedicine. This leads to critics contending that VCs flood the world with too much money for ideas that don’t solve big problems.