Transparency will innovate Venture Capital
Author: Kavedon Kapital Team
The venture capital industry has come a long way since the days of Arthur Rock (aka The First Venture Capitalist). Annually records are broken regarding largest fund size, largest venture round and post-IPO valuation. There is also lots of media coverage that pushes venture capital as successful and ‘sexy’.
No doubt, a lot of the technological innovation, or dare I say “revolution”, has been funded by Venture Capitalists. Yet, ironically, the industry itself has seen little innovation.
The lack of innovation in the industry has made venture capital opaque, exclusive, and fundamentally the financial returns are sub-par.
According to the Atomico’s ‘State of European Tech Report 2020’, regarding fundraising:
- All white founding teams raised nearly 3.5x more capital than mixed ethnicity founding teams and nearly 50x more capital than all ethnic minority founding teams; and
- All male teams raised 12x more capital than mixed gender founding teams and over 50x more capital than all female founding teams.
This coupled with the British Business Bank’s ‘Analysis of UK Financial Returns, October 2019’:
- The average Distributions to Paid-In Capital (“DPI”) is 0.87, in fact apart from the upper quartile, most VCs fail to deliver a DPI of 1.
This means that for every £1 invested by venture capitalists, on average the return 87p to the Limited Partners. DPI does not also adjust for inflation, so in real terms, it is less than 87p!
It’s time for change: Step in Kavedon Kapital
We at Kavedon Kapital, believe that the venture capital industry is in desperate need of innovation. We believe that by applying Circular Economic principles to the industry, we can make it more transparent and inclusive.
One of the key principles that will innovate the venture capital industry is simple but effective, Transparency.
Transparency is critical to the application of Circular Economics, and in the venture capital industry it will be so refreshing, it might be innovative enough. Once transparency is truly applied to the venture capital industry, it will do away with warm referrals and close-knit networks being the sole source of deal flow. These forms of deal flow origination have been barriers to incredible women and ethnic minorities founders.
Founders will no longer get lost in the black box that is the “investment process”. Imagine a world where founders knew what was expected from them throughout the process, what a VC’s investment rationale was, what VCs are looking for and Founders received actionable feedback.
Imagine a world where VCs communicated better and more effectively with founders. We believe a better process of investing can only lead to better returns for our Investors.
If you are an Investor realising the importance of switching to a Venture Capital model built on Circular Economic principles, get in touch with us to learn more about how Kavedon Kapital can help.
Our deal room is also open, so all high tech early stage Founders please head over to this page to submit your deck.
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