Looking forward to the days of 5x returns

Scale Venture Partners Sharon Wienbar on the changing VC industry

Is the venture industry finally rightsizing itself so at least the top quartile venture firms can get decent returns? Sharon Wienbar, venture capitalist at Scale Venture Partners, believes so. In this third segment in a series of interviews with Bambi Francisco, Sharon talks about the challenges venture capital firms face. 

These are widely noted across the blogosphere, of course. As Bambi pointed out in a post last year, "the venture industry is heading into a perfect storm of problems, according to one writer. Union Square Ventures Fred Wilson says there's a venture capital math problem. A number of venture capitalists have chimed in as a chorus, saying it's broken. Many say there are too many venture capitalists, and that it's not good for America and that the industry is undergoing a substantial reduction in size."

But Sharon adds a bit of optimism to all that gloom.

"Once the amount of money rightsizes relative to the whole economy, the returns should return to mid-80s to mid-90s," she said. "You had the pool top quartile return at about 5x return. And, that's a really strong return... That’s what we’d like to see going forward."

Here's what's been wrong with the industry in a snapshot:

-Biggest thing that's challenged returns is that it's been too big. The strong returns from the Internet bubble caused money to flood in. The

-Too many funds, too many me-too companies getting financed. The best companies didn't get the best traction because they had to compete aggressively

Watch more of the interview to find out why it's changing, for the better.