More and more capital is chasing fewer and fewer ideas
WHO ARE the heirs of Robert Fleming, the 19th-century Scot who saw that America was the coming place to put risk capital? The venture capitalists of Silicon Valley have the best claim. The businesses that loom largest in public equity markets—Amazon, Apple, Facebook, Google, Tesla and the rest—were nurtured by VCs. Venture-backed companies account for around a fifth of the market capitalisation of public companies in America and almost half their research spending. The funds that unearth such gems stand to make pots of money. VCs have on average (an important qualifier) beaten the public market net of fees over the long run.
Most firms that receive VC funding fail. But the winner-takes-all nature of technology markets means those that succeed often do so extravagantly. The VC industry is at the frontier of capital allocation. The typical investor has to kiss a lot of frogs to find a prince (or even a decent-looking frog). The average VC firm screens 200 targets, but makes only four investments, according to a study in the Journal of Financial Economics. Part of the added value, say its authors, is to improve the governance of startups and keep a watchful eye on management.
大多数获得风险投资的公司都会失败。但是，技术市场的“赢者通吃”的本质意味着成功的企业往往能够获得极大的成功。风险投资行业处于资本配置的前沿。典型的投资者必须亲吻很多青蛙才能找到王子（或者哪怕是好看的青蛙）。根据《金融经济学杂志》（Journal of Financial Economics）的一项研究，风险投资公司平均会筛选200个目标，但仅进行四项投资。其作者说，增加的价值的一部分在于改善创业公司的治理并密切注意管理层。
No wonder pension schemes, sovereign-wealth funds and mutual funds are competing to write big cheques for Silicon Valley’s next generation of stars. But unlike the railways, brewers, distillers and mines of the Fleming era, today’s new firms have no great need of capital. A young technology firm can rent computing power from the cloud, download basic software from the internet and use a range of cheap, outsourced services to help it grow. Startups are staying private for longer. When they list, it is because the founders need to cash out or (as with the latest rash of tech IPOs) when the money on offer in the public markets is simply too good to turn down. It is not to raise capital for the business.
Very few new firms turn out to be world-beaters. Good ideas are scarce. But VC firms that have succeeded in the past may have an edge in finding them. A study by Morten Sorensen finds that companies funded by more experienced VCs are more likely to succeed. And sourcing the best entrepreneurial talent is more important to success than the development of that talent.
In this sense the best venture-capital firms resemble elite universities. Because the brightest turn up at their door, they are able to charge the highest fees. And those fees are mostly for the accreditation and the social networks that the institution can offer.