Bill Burhnham made a great point in his post today about the size of venture funds and the respective size of their investments.
He points out correctly that the size of the fund drives the size of the investment. A billion dollar fund simply can't afford to make $1 or $2 million investments. A $5 million would be small, maybe too small. This pushes funds to invest too much, he says, in companies that aren't ready or may never need to deploy that much money in order to achieve a successful exit.
Consider the economics, if a company can effectively use $2 million to create a business worth $50 million, that doesn't mean that the same company could use $5 million to grow to $100 or $150 million in the same time frame, meaning that returns on the larger investment would be lower!
