The problem with this analysis is that the VC's investing money in companies aren't choosing between various asset classes - they have funds committed to their investment thesis, so they aren't going to go invest somewhere else if returns start looking better in other sectors. It's the LPs who theoretically may allocate less money to the VC's if they see better yields elsewhere, but their fund commitments are long term and take a long time to change. Funds have a life of 7-10 years and lots of folks have just raised new funds, so there's a lot locked in that will keep going into startups for a while now.
Right, but where does VCs' money come from? The money gets to choose asset classes. VCs aren't the money, they just choose how to invest the money. All of which is not to say I agree with the analysis.
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The problem with this analysis is that the VC's investing money in companies aren't choosing between various asset classes - they have funds committed to their investment thesis, so they aren't going to go invest somewhere else if returns start looking better in other sectors. It's the LPs who theoretically may allocate less money to the VC's if they see better yields elsewhere, but their fund commitments are long term and take a long time to change. Funds have a life of 7-10 years and lots of folks have just raised new funds, so there's a lot locked in that will keep going into startups for a while now.
Right, but where does VCs' money come from? The money gets to choose asset classes. VCs aren't the money, they just choose how to invest the money. All of which is not to say I agree with the analysis.
right, my point is just that the money is already committed to the VCs for the next 7-10 years so can't change that quickly.