Business Model = VC

There’s a running joke in China… that Internet companies’ business model has been Venture Capital.  There’s usually some truth in any joke, and this one seems to be right on; at least for 99% of the companies funded.

And this is not just for China.  I bet if we did a study on all the startups which received VC funding globally, and tallied those who have positive ROI… the result won’t be very pretty.  Some would argue that this is the nature of VC – that you put 10 bets, and hope that one will hit it big.   The odds have not been that good, however.  Yet, what keeps a lot of VC in business lately have been corporate M&A’s and what I’d call “swapping assets”.   Like musical chairs, these buyers will realize their investments too have negative ROIs and will be passing the hot potato along. 

On the flip side, venture capital bets on future business models.  Perhaps those with enough patience (and capital) to stick around will eventually get the last laugh.  But for now, Internet is way out-of-favor, at least in China.