Yesterday both Harvard and Yale reported big losses (27.3% and 30% respectively) for the year. For venture capital, this is even worse news than may be initially apparent.

The managers are pegging the problem on private equity and hedge fund investments. Of course, those investments are why Harvard has kicked butt in the last few years, gaining an average 8.9% annually, compared with 3.2% for similar funds tracked by Wilshire Associates, a consulting firm. The nature of private equity, and especially venture capital, is that you do really well in the good times and really poorly in the bad. With a more conventional approach, Harvard could have lost half as much this year... but it's 10-year performance, even taking this year's plunge into account, remains a testament to high-risk bets.

Nonetheless, management chief Jane Mendillo wants to change the investment approach, increasing cash on hand and bringing its appetite for riskier investments more in-line with Harvard's financial needs... both of which mean allocations to venture capital will decline by even more than the 27.3% one could assume.

Expect to see a lot of posturing public posturing from VCs as they fight for their jobs. Within firms and behind closed doors, firms are making tough decisions about who will stay on for the next fund. More interestingly, firms will look for other sources of funding and liquidity--including alternate routes like XChange, SecondMarket and SharesPost. Taking a page out of Obama's fundraising book, VCs may try their hand at crowd-sourcing funds. The presidential campaign is fabled to have raised over a million donations of $200 or less, catapulting its coffers passed all other contenders (though there's speculation this was in part rigged by a few wealthier donors). Now that the global Silicon Valley has gone green, the possibility of pulling off a crowd-sourced micro-investment approach could work. Socially conscious groups could encourage their members to help fund technology solutions to climate change, education, healthcare...  the idea has bubbled up recently in a few conversations with investors, and firms like Sequoia are rumored to be changing up their early-stage investment approaches.

All of these alternate liquidity and investment routes will require agile regulation navigation, and the transformation of the industry will make an interesting spectator sport--lawyers and journalists can look forward to a few interesting years as investors shift away from the traditional giants--LPs and big public exchanges--and to the crowd.