Analysts believe that, as we begin the age of venture capital revolution, disruptive technology draws majority of venture capitalists. But firms are becoming overwhelmed by high-tech innovations. That's the challenge venture capital is facing today.
The Silicon Valley is now the hub of American capitalism. In a report from The Financial Express, it started when venture capital firms in the U.S. invested $49.3B in 2014; 41% went to software and 12% in bio-technology. It was recorded as the highest in 15 years.
Along with that, vast numbers of employees flocked on Microsoft, Google, Facebook, Intel, Ebay and Apple.
It happened when firms invested on businesses under disruptive technologies. A disruptive innovation forms a new market, adds value to it and disrupts the current market that was built over decades to replace the older technology.
Venturing on these companies has a high risk, but when they succeed, it will bring immeasurable profit in the future.
Rand Daily Mail specified that no one ever thought Airbnb, an app that reserves accommodations will be the largest provider assisting one million people every night. It is the app that dominates the market, not the hotel chains analysts expected.
Even so, there is a great challenge most venture capitalists are not aware of. As geeks change our lives, they clinch their empire. The tech society rapidly disrupts the industry, grabs trillion dollars and set billions of people utilizing their innovations.
If commerce leads the world, it should not be restricted only for some. Undesirably, it is happening today. As read on Tech Crunch, around 75% of investment for startups goes only to three regions; California, Massachusetts and New York. But in truth, lots of innovation came from everywhere, especially to developing cities. Some investors who bet on these areas create balance in the entire economy. They have better valuations and lower management costs.
Accordingly, the investment world has been so accustomed to 'smart guys'. Only a few percent of venture capital in the U.S. supports companies run by women and under-represented minorities.
Capital firms had developed impressive businesses. But entrepreneurs in different areas seek equality and significance. Capitalists must balance it, venturing on health, education and food, regardless of the location, founders' profile and industry because these sectors need a lot of capital especially the health services.
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