The Restructuring of the VC industry

Comes as no surprise that the number of VC firms in the Valley are shrinking, and will continue to do so:

There were 844 venture firms investing in U.S. companies last year, 40 fewer than in 2006, according to the latest data from VentureSource, a research unit of VentureWire publisher Dow Jones. That is down 30% from the bubble year of 2000, when there were nearly 1,200 active investors....

In fact, The National Venture Capital Association President Mark Heesen:

....foresees a 15% decline in the next two years in the total number of venture firms investing in the U.S., many of them too small to meet the NVCA’s membership threshold of $5 million under management. The NVCA has about 470 member firms representing 90% of the venture capital under management in the U.S.

Partly its the shakeout from the bubble, but partly its due to good old Messrs Moore and Mercalfe - it costs an order or two of magnitude less to build a startup and get to a decent point of traction, and if it is successful it can usually get mmoney on decent terms from a number of sources. The industry needs to restructure to a more "mass production" model for funding, via incubation (Y Combinator) or a more simple deal, portfolio approach (eg Charles River)