Don Dodge wrote an insightful post about venture returns, essentially arguing that venture capital is a bet between "risky and outrageously risky" investments. It’s hard to argue with his points.
The facts are what they are, but there is something missing from this and I can’t quite put my finger on it. Perhaps it’s the value over time of acquired knowledge carrying forward like a long term savings rate, or the people networks. I really don’t know.
The other fact that I can’t reconcile with Don’s assessment is that I know of quite a few funds that pull down 30+% IRR and they aren’t the top tier brand name funds that often get talked about. Maybe it’s a reporting issue because venture funds are notoriously secretive about returns.
The one immutable fact is that there has been an enormous amount of wealth created across a wide spectrum of participants through the venture finance model. Maybe it’s just transferred wealth?
UPDATE: Jason’s post is worth reading as well.