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Stop with the Series A schadenfreude

December 3, 2012: 4:33 PM ET

Many tech startups are hitting a funding wall. And apparently we're supposed to celebrate.

FORTUNE -- Lots of tech startups that raised seed funding can't get follow-on investments from venture capitalists, thus causing the companies to disappear. It's being called the "Series A crunch" (® Sarah Lacy), and has sparked the type of schadenfreude usually reserved for Lindsay Lohan's money troubles.

Be seeded, be resented.

To be clear, I'm a firm believer in the idea of meritocracy. The best companies should get funded, and the crappy ones should fold so their employees can move on to more worthwhile pursuits.

What I don't quite get, however, is why so many people believe venture capitalists are infallible arbiters of what rocks and what sucks. These are many of the same venture capitalists who helped inflate the dotcom bubble before it burst -- getting its recessionary goo all over America. And the same ones who slowed down their investing pace in the middle aughts, when companies like Facebook were just getting started. And who gave absurd later-stage valuations to companies like Zynga (ZNGA). And who let Andrew Mason cash out all of that Groupon (GRPN) stock pre-IPO. And who do you think first put money into Solyndra?

My point isn't that venture capitalists are dummies. It's that they make mistakes. Just take a look at the companies that Bessemer Venture Partners admits to passing on. Every firm has them, and it's not unreasonable to think that certain quality startups fall through the cracks. Or that some undeserving companies get to move forward. In fact, the "Series A crunch" likely means that more errors are being made, rather than fewer (since VCs are sorting through an increased number of seed-funded deals, without getting more hours in the day).

One more thing: Before insulting all those "dopey angel investors," it might be worth understanding why they backed so many companies in the first place. Research has shown that angels have the best chance of producing positive returns by investing in more, not fewer, startups. And I don't mean five rather than two. I mean 50 rather than 10.

But don't let me ruin the fun of feeling superior to all those folks in Silicon Valley who foolishly chased their dreams (or who helped others to do so). I'm sure that venture capitalists will make everything work out okay.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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