Half of VCs nationwide think their industry is broken survey

More than half of venture capitalists (52.9%) believe that their industry is “broken,” according to a survey conducted by executive search firm Polachi Inc., but some Vcs take exception to the claim.

Moreover, the survey also found that despite increasing indications from the Obama administration that the recession is lifting, nearly 60% said that they are less confident in the VC industry today than they were six months ago. Framingham, Mass.-based Polachi said that 139 senior executives at VC firms nationwide participated in the survey, which was conducted in June. Nearly 44% of the respondednts, or 59, are based on the West Coast or in Silicon Valley.

“These survey results validate a cautious sentiment we have been observing for some time now in the VC industry,” said Charley Polachi, a partner at Polachi.

However, Jason Mendelson, a managing director of the Foundry Group and a newly elected member of the board of the National Venture Capital Association, wrote in his blog last week that he disagrees with the notion that the industry is broken. He adds that there’s never been a more exciting time to be involved in venture capital.

“We are talking about an asset class in which each fund has a 10-year to 12-year life span,” he wrote. “We are also talking about an industry that has proved its best returns are usually made on companies invested into during a down economic cycle. Why shouldn’t we be excited about today?”

Similarly, Fred Wilson, a partner at Union Square Ventures, said on his blog that he was asked to participate in the survey, but declined. He says that the survey overstates the issues and that the VC industry is not broken. In looking at the full survey results, Wilson said he was not surprised to see that VCs are not worried about deal flow and the management teams they work with, are a bit worried about their portfolio and are a lot worried about exits.

“The problem with the VC industry is that there is too much money in it…and a tepid exit environment,” Wilson wrote on his blog. “Nothing is wrong with the VC business and the startup ecosystem that a few years of weak fund-raising can’t fix.”