That’s the question posed by Charley Polachi at Private Equity Hub.

The results of a survey of over 1,000 VCs seem to indicate that it is, and the industry as a whole is in need of a ‘reset’ – both in terms of the number and type of companies involved, and in terms of their attitude to ‘innovation.’

Although in one conversation, one of the partners shared with me an ironic observation – he works in an industry that preaches innovation and it is all about creating new businesses and investing in new ideas, but the venture industry itself – doesn’t want to change! It is barely a 30 year old industry but slow to change, almost institutional in its view of itself as it relates to structure, fees, compensation, succession planning, etc.

Georges van Hoegaerden has an interesting comparison between how the venture capital model is supposed to work (the Vinhod Khosla model), and how it actually works (the Subprime VC model) these days – as illustrated by the charts below.

It’s a nice comparison and neatly illustrates how the low risk subprime model forces VCs to invest in technologies where much of the risk can be minimized, such as Web 2.0 businesses rather than anything particularly ground breaking which, if it is science based, will probably need quite a bit of investment beyond half a dozen laptops and a serviced office required for a web business.

Of course if you don’t take risks you can’t expect to participate in the upside, so the subprime model is a self defeating and illustrates why so many funds have had so much trouble returning anything except lame excuses about how tough it is out there at the moment to their investors recently.

I’m almost ready cut out the tongue of the next person who uses the excuse that “it’s tough out there” for sitting on their backside and wringing their hands. Looking out of the window I can see that it’s raining out there, so when I pop out I’ll take an umbrella.