do you disagree or agree, how would you debate this on either side?
I don’t have a strong opinion on this issue, but here is how I could see each side of the debate:
AGREE:
The influx of VC funding does create crowded solution spaces and intense competition in many markets, making it a challenge to generate outsized returns.
There is some truth to too much money chasing too few really transformational opportunities right now.
Incremental innovation has limits in how much value it can create, so returns likely diminish with each additional entrant unless the market expands dramatically.
Consumer spending and liquidity aren’t infinitely expandable, so some shifting of growth between sectors rather than aggregate gains is reasonable.
Transaction taxes and inefficient government spending do bleed away some liquidity and productivity.
DISAGREE:
Markets are highly dynamic. What looks crowded today won’t stay that way as leaders emerge and laggards fall away. Consolidation and shakeout pave the way for winners.
VC funding should be viewed over longer time cycles. Periodic excesses get corrected and don’t permanently damage the ecosystem.
Good VCs don’t overfund any particular space but rather spread their bets across emerging opportunities. Their returns won’t suffer from temporary crowding.
New technologies and business models inherently expand markets or create new ones, leading to aggregate growth, not just shifting shares.
Globalization and population growth expand the revenue pie. Creative destruction replenishes opportunities.
Governments enable growth via rule of law, infrastructure, education, research funding. Transaction taxes are a small price to pay.
In conclusion, good counterarguments exist on both sides of this debate. The VC ecosystem is complex and cyclical. Ultimately the bears and bulls will each find evidence to support their stance.
it is important to note that VC funds have similar levels of darwinian-ness as startups (most funds don’t go on to raise the next fund)
so there’s pruning at the level of LPs to funds and funds to startups
(so perhaps VCs are “fucked” in the same way most startups are)