Robert Hendershott, a professor of private equity and entrepreneurship at the Leavey School of Business at Santa Clara University, believes there’s little need for venture capital in today’s digital startup sector.
According to The New York Times, it just doesn’t cost that much to get a Web-based idea off the ground.
As the cost of starting a Web company decreases, thanks to cloud computing services and technology that entrepreneurs can rent instead of buy, many founders can finance a new company without the help of venture capitalists, using their savings, money from family and friends and credit card debt.
The venture capital model evolved to start and expand capital-intensive semiconductor companies. “Without resources beyond the reach of most entrepreneurs it simply wasn’t possible to create a new semiconductor company, or even an Internet company,” Mr. Hendershott writes. Now, Web start-ups are routinely started for less than $50,000.