Bob Rice in Wired / Portfolio.com:

The basic V.C. model is broken. And new technology is driving a much more efficient system for capital allocation to startups.

In fact, technology is largely at fault both for what’s wrong with the V.C. world and for what’s replacing it. The problem with the industry is this–it’s just too cheap to start new companies these days.

I agree with the notion that the traditional venture capital model is ill-suited for many technology, web-based startups. But it’s not just about changing technology: it’s a cultural change, a generational change, a shift in how economic value can be created, funded, tested, supported and delivered.

There has also been a tremendous amount of buzz lately about Silicon Valley losing its capacity for innovation, concurrent with a lingering discussion (eulogies?) about venture capitalists losing their boldness for making risky investments to fund innovations. While I’ll pass on adding to the Silicon Valley innovation meme, I will add that the changes in the venture capital industry are not about venture capitalists losing their boldness or their capacity to fund innovation: it is a function of traditional venture capital economics and the underlying technological and cultural shifts away from the traditional venture capital business model. These grander shifts in technology and culture will highlight and test venture capital’s own ability to innovate.

Want an example of innovation in investing in startups?

Angelsoft was founded in 2004 with a simple idea: to bring the power of collaboration technologies to the early-stage investment industry. Today, with 409 angel groups and VCs, 11,242 investors, and 2,100 new company applications a month, Angelsoft has become a vital ecosystem where real entrepreneurs and real investors meet and collaborate in the effort to build the best new companies of the 21st Century. (link to Angelsoft)

Angelsoft has created a platform for angels, angel groups and entrepreneurs to share deals and ideas, creating a tremendous opportunity for angels and entrepreneurs to access each other and collaborate on testing new ideas and starting new companies. While we can still debate angel investment economics, structure and incentives, the fact remains that the platform creates enormous opportunities for everyone interested in early-stage ventures to play a larger, more powerful, more transparent role in figuring out how to best help bring ideas to execution.

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The title “Markets in Everything” is stolen from Tyler Cowen and Alex Tabarrok’s Markets in Everything posts at MarginalRevolution.com