Dave McClure has published an informative piece about 500 Startups and how the venture capital world works, and it is worth reading. It talks about his history with investments, as well as the failures that he sees in other VC firms. Then it gets to the meat of the matter, which according to McClure, is that VCs try to teach entrepreneurs how to build huge, scalable companies, but the VC firms themselves are based on a 50 year old model that doesn’t scale. I’m inclined to agree on this one, as not much innovation is happening outside of Y Combinator and a few other firms.
[Source: 500 Startups]