Last night my partner Brad and i spent 2+ hours guest lecturing at NYU Business School on the VC business. We did two classes. The first one was on when VC is a good source of capital and when its not. That's a class i've taught for about 3 years now. It's fun to do because i mostly argue against VC as a source of capital. And that's not an argument i usually get to make.
The second class was about what has changed in the tech VC business in the past four years. As we all know, a lot has changed.
Brad did a great job infusing the second class with some good analytical thinking. He has just finished reading Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Perez. Now this is a tough read. I admit that i couldn't get through it. It's very dry for my taste.
But its a brilliant piece of analytical thinking which basically argues that the last ten years were just another typical buildup, bubble, and burst phenomenon that happens in every technological revolution.
The book compares the manufacturing revolution, the auto/oil revolution, and the IT revolution, both in terms of the diffusion of the technology throughout the economy and the valuations associated with the companies involved. It turns out the crash we just went through was typical and now we are on to the synergy phase where a lot more money will be made, but in different kinds of businesses.
I wish i knew how to put the charts from the book into this post, but i don't. So i'll just suggest you go out and get the book.