Venture capital is a three parameter problem. Buy low, Sell High, Sell at the Right Time. Most people seem to have ignored the third parameter. Time-to-exit used to be 4-6 years. Then it collapsed to 2 years in the Bubble. Now it seems pretty much infinite. Divide by Zero and get infinite IRR. Divide by infinity and get -100% IRR. The proof is left to the Investor.
With even the "bluest of the blue" Silicon Valley VC firms – some of whose partners are famous for saying they will never invest in companies they cannot drive to - starting to make direct investments in (relatively mature) Indian companies, it sure seems as if the drying up of exits in the US is changing a lot of rules in the business.
Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.