Thanks for your comments. I’m advocating that VC firms need to be boutique operations and should not be scaled (for both people and money) to be very large.

The catalyst for going against this advice is what got us into the financial mess that we’re seeing today — essentially too much money available too easily. Between private equity, fund of funds, endowments, etc. there was just too much money chasing after venture capital. The structure of venture firms is such that the more money they raise for their funds, the more money they take home, so there is little incentive to keep the funds small.

Of the ones you mentioned, it’s definitely greed and keeping up with the Jones. If the firm next door raises a Billion dollar fund, it makes news and encourages other to up their fund sizes.

However, I think this problem will be behind us very soon. I expect the amount of money going into venture capital to decline considerably in the near future. The folks in venture are on the whole smart people and I think a lot of people are seeing and realizing the same trends. (I’m just being a bit more vocal about it here on the blog!)

but i am more interested in what’s the catalyst for going against this advice. why doesn’t everyone follow this logic?

greed? boredom? keeping up with the jones’?