How VCs Make Money: the 2 and 20

In downturns in the economy, it’s then that Venture Capital Funds really come to the forefront of our startup communities because it’s then that entrepreneurship shifts from a buyers market to a sellers market.

Buyers vs. Seller.

Some time ago, I got a little bit of s*** for suggesting that founders think of Venture Capitalists as customers. Lambasted a bit because noble, wealthy people really took some offense at being called customers, the fact is, the underlying notion has merit because Venture Capitalists are exchanging capital for a product of value (that being equity in your venture).

We can draw from a conventional wisdom of Real Estate an appreciation of how entrepreneurship goes through Buyers and Sellers Markets and thus, it’s the “Buyers Market” (in which we find ourselves now) that smart investors get involved.

“A buyer’s market occurs when the supply (available homes for sale) exceeds demand (the number of buyers seeking to purchase homes). If you’re buying a new home, a buyer’s market is the ideal time to make your move. You might be able to buy a great home for a lower cost than you would in a seller’s market.

A seller’s market occurs when demand exceeds supply, or there are more buyers seeking to purchase homes than there are available homes on the market. This often…