Is “Real Venture Capital” (RVC) the best place for assets:
RVC Is a Different Asset Class from MVC
Real Venture Capital (RVC) is anything that takes a risk and works hard to create something fundamentally new. Many classic VC funds fall into this category. So do many angels. But I would also put entrepreneurs who bootstrap their ventures into this category. I would also even put Private Equity and Hedge Funds that do turnarounds and transformations.
This is very different from Momentum Venture Capital (MVC). The old asset class categories make less sense in this context. You get all kinds of MVC that would traditionally be called VC, Angel, Entrepreneur, Private Equity or Hedge Fund. But they are fundamentally different from Real VC. MVC jump on trends and amplify them. If they are lucky and smart, they get out in time. They are the bubble inflators. Their core competency is timing trends. They ride momentum.
In a downturn such as this, MVC get crushed. MVC that timed it well and got to cash are sitting pretty, playing golf, ready to jump in again when the cycle turns. But MVC left “holding the bag” at a time like this get crushed.
RVC is contrarian. They invest when most people are scared and sell when everybody is bullish. MVC is the opposite. Smart MVC invest when the trends are obvious and get out quick, the classic “flip artist”. Dumb MVC invest when the trends are obvious and don’t get out in time. But both smart and dumb MVC are primarily trend spotters.
Will the Venture Capital community return to RVC or will they remain as Momentum Venture Capitalists (MVC)?
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