I have written and been quoted many times before on the rise of a new layer of capital markets and the segmentation of venture capital. Venture capital certainly will continue to play an important role in years to come, but many major variations on the current model will emerge. One of the most important drivers of change is the far lower capital-intensity of web and technology businesses. With powerful development platforms, ready access to global talent, and speed to market being of the essence, many ventures can get going with minimal capital. The proliferation of less-capitalized companies has been a feature of the entrepreneurial landscape over the last year, supported by a slow drying up of capital from venture firms.

In today’s New York Times an article titled A New Kind of Venture Capitalist Makes Small Bets on Young Firms focuses on Union Square Ventures and in particular Fred Wilson, the new superstar of web VCs. The piece starts out by describing how Etsy, now the leading crafts marketplace, was delighted in Union Square Ventures to find a VC firm willing to take just a 5 percent stake in the company. Most VC firms demand at least 20%, and usually seek strong or dominant influence on the company’s strategy.

Read more →