Media has followed the boom and tone-down in venture capital over past 4 years. As much as last 12 months saw a dip in venture capital, I have a feeling that some of the enthusiasm from journalists declined as well. Only the most dedicated journalists have survived the theme fatigue! And as many of us in venture capital have been doing, they are seeking to understand how investment themes have changed over past four years.

In my own observation, venture capital has followed a much accelerated hype cycle over past four years, where many themes have come up, quickly rising to hype prominence, and then settled to the golden mean – yes, there is a golden mean even for the most hyped technologies! Sample the following peaks:

  • 2006 – Transactional Internet, Mobile VAS
  • 2007 – Web 2.0, Retail
  • 2008 – Microfinance, Cleantech
  • 2009 – Education, Healthcare
  • 2010 – Rural distribution perhaps? 3G? Other guesses?

I do not list real estate above because its not a “venture capital” category. The thing with hype is that the extent of hypeis only visible post facto, and that some people will actually make money in the hyped sectors (Online travel for example). The short duration of these specific hype cycles is a concern though – VCs operate well in 3-4 year long cycles, not in 1 year long ones.

Our own learnings at Canaan have been more around aspects orthogonal to funding theme – we have more or less stuck with our key areas of focus over past 4 years in India. The relative emphasis on idea versus entrepreneur, for example, has tilted more towards the latter. We have also made some bets in sectors listed above and future will tell us if their golden mean is golden enough for us!

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