VentureBeat thinks so - I think this gets close to the heart of the problem:

However, a lot of VCs are likely to go under this time. This asset class significantly underperformed other asset classes between 1998 and 2006. A handful of firms - Sequoia, Kleiner, Benchmark, Accel and a handful of others - have pulled up the average performance somewhat, because they've produced an inordinate amount of the successes (a small group of homeruns, the eBays and the Googles, account for 25 percent of total VC returns over the past 20 years

That's the symptom. The problem? Way too many VC's have tossed way too much money at outfits that can't even spell business plan, much less actually have one. Look at Twitter - sure, it's got tons of users, but is there an actual plan to make money? Wouldn't it have been prudent for the VC's, in one of the meetings they've had with the Twitter guys to explain what the revenue model is?

Twitter is just one example - it just happens to be a really good one. A lot of the VCs deserve to go under, because they can't be bothered to ask the most basic questions. Way, way too many of them operate like Scott Adams' depiction of "Vijay, the world's most desperate VC".

There's also the whole "Web 2.0 cheerleader section" - people like Scoble and Calacanis - who have continually talked up things like Twitter. No guys, advertising is simply not the answer to everything. Heck, try reading anything that Doc Searls writes on the subject (like, say, this), and you might start to understand that it's barely the answer to anything.

Technorati Tags: venture capitalists, business model