but honestly naren’t these deep pocketed individuals and organisations best able to ride out the storm?

Could not agree with you more. Rather than living within the Law, players spend more time and money trying to bend or buy the keepers of the Law, to make a profit.

As a ex-sales executive here in Australia, I cannot count how many times I have had to fight those above me to work with in the law and not bend it. All because those above do not feel they had a win, with out being clever in the bending of the law or hoodwinking of a client.

Skippy

VC funds had their commitments reduced by 50% in the dot com bust, There is precedent here.

As for PE, even thought the fund charters were no doubt drafted so broadly as to permit having the fund use a capital call to replace maturing debt, that most certainly is NOT what the investors were promised or ever thought would happen.

And that is a general problem in our society. There is often a big gap between the sales pitch and what the fine print says. People too often rely on verbal, non-binding assurances from supposedly reputable parties.

In most cases, it might make sense to suck it up and fund, just to get back to even in another 3 or 4 years. I'm not paid enough to make that call, though. Might as well ask the Magic 8 Ball.

While tech-related private equity & venture capital gets all the media attention, billions are invested into grassroots development opportunities by infrastructure, industrial, and resource funds. The buyout funds provide little value, but when you need $300 million to develop a steel plant based on a new technology, it's good to have the funds around.

The story will probably end like the rest of the financial sector: much smaller, but better funds that actually add value. That leaves little future for the big leveraged buyout operations, I hope.

In other words when they fail to cough up the money they have promised hey are breaking the contracts. It’s nice for authors to suggest that more funds need to “get hardnosed”, but breaking contracts has downside too.

I don’t have a lot of sympathy for, say CalPERS, over the VCs. CalPERS is one of the largest funds in the world. They go around acting holier than though. I still remember when some idiot CalPERS representative came to the annual meeting of the public company I worked for (revenue over $1 billion) and spent 10 minutes asking when we were going to get more minorities on the BOD.

Total freaking idiot who was only concerned with his politcally correct agenda and not with the business issues around the company that he had invested other people’s money in.

Hopefully the VCs and PEs sue and win big.

I read that as: Endowments are selling off the losers for whatever they can get (which they expect is more than letting it go to term even without delivering further capital calls.)
Let’s face it: Lots of VCs are dead men walking.

As for the VC business in general, the model is just fine. The problem is that there’s way too much money in VC right now. If you look at the top quartile funds, they perform very well.

The reason why there is so much money is because various unsophisticated money managers across the country (eg. teacher pension funds) either read Swensen’s book or hired a consultant that read Swensen’s book and decided to allocated a certain percentage of their fund to VC.

That’s the wrong way to invest in VC. If you can’t get into the Sequoias and Kleiners, putting your money in some other fund won’t be the same.

As for the commenters getting excited about the Paul Graham model, what he’s got going seems to be working well for him but there is very little overlap between the scale of his investments and the scale of early stage VC investments. In my opinion, he doesn’t seem to be competing directly with VC as he is with angel funding and other forms of seed capital.

If he’s going to generalize from that to any conceivable business venture, I think he’s blowing smoke. You can’t build railroads, jet aircraft, space tourism ventures, without seed capital.