I move on to two more issues:
(1) The Hay Stack.
Apparently a venture firm can have a polished Web site put up for them, get some publicity by writing columns in the tech media, and then, presto, get in their e-mail a huge stream of contacts from entrepreneurs.
Maybe they will fairly quickly get 2000 such contacts a year.
So, such a VC gets a huge stack of hay in which they are looking for golden needles.
Here's my guess at where the VCs are making a huge mistake: They are trying to learn from the hay. They start to conclude that the hay is 'representative' of 'what is going on in information technology', read a few hundred such contacts, and conclude that they are developing "deep domain knowledge". They start to believe that the best possible investments are from the better looking stalks of hay.
A huge problem here is that they just have no other very good criteria. In strong contrast, the guys who did the physics for the Navy's version of GPS had physics going for them; they were correct, knew they were correct, knew just why they were correct, and could convince Navy technical problem sponsors that beyond any doubt they were correct, feasible, practical, realistic, etc. No important role for guessing or intuition. Not a lot of doubt. Not much risk. And whatever else was in whatever stack of hay was just irrelevant. And revolutionize military strategy.
As an explanation there is:
"It is still an unending source of surprise for me how a few scribbles on a blackboard or on a piece of paper can change the course of human affairs."
Stanislaw Ulam
VCs and their limited partners might want to start to listen up. Especially from Ulam: On its first try, his second contribution yielded the energy of 15 million tons of TNT. On its first try, his first contribution yielded about 15 thousand tons. Before that he had a nice result in probability the French probabilist Le Cam called 'tightness' with a nice presentation in Billingsley's 'Convergence of Probability Measures'.
(2) The Research
I can believe that the VCs don't receive many promising proposals based on research. One reason is that not many talented, well trained researchers cross over to become entrepreneurs. A second reason is, researchers who contact VCs get such a poor reception that researchers have been discouraged.
So, VCs don't see much promising research in their incoming e-mail.
We might also anticipate that a VC has described to their limited partners what projects they will fund, and research on paper is NOT included!
There have long been plenty of US DoD technical problem sponsors who were 'innovative' with astoundingly high batting averages. Somehow VCs seem to have ignored such work. Net, looking for an 'innovative' angel or VC looks like looking for hen's teeth.
Final remark: What to do about the situation? For me, as an entrepreneur, just be successful, thus, solve the problem for myself, and let others draw what they will from my example.
More generally, I don't know what VCs would say to what limited partners to make a significant difference, and then I don't know how they would get good projects based on research.
So for now for me, the flip side of the problem is an opportunity.