Over at The Angel Accelerator I’ve been teaching new startup investors the history of venture capital. It’s one of those industries that feels like it’s been around forever, maybe inherited from the Roman or British Empire, but in reality, in its modern form, was created in my grandparents generation, after my parents were born, and wasn’t a mature, robust, big industry until the just before the dot-com bubble.
The consequence of this “been around forever” thinking is that the norms and practices are considered sacred and unchangeable, despite many of those practices being outdated.
Simple case in point, the 10 year fund. Why are venture capital funds 10 years long? Because sometimes in the 1960s or 1970s someone decided that 10 years was plenty of time for a startup to grow up. Fifty years later, reality is proving that assumption false, with successful companies taking more than a decade to prove a success or failure.
Breaking away from traditional is a challenge, and today Sequoia, one of the most prestigious California venture capital brands announced they are doing just that. No more 10 year funds for them. Instead, the Sequoia Fund is a perpetual investment company.
Congratulations Sequoia for being the first big brand to wake up to reality!
And welcome to the growing club of investment companies that aim to do what is best for startups, instead of simply following an out-dated best for investors. Fledge did the same in its 2017 restructuring, which we never blogged about publicly. Africa Eats did it in a different way in 2020, with this 1-page whitepaper explaining the core idea and this blog post explaining why the holding company model is better than a VC fund.