Dave Winer wrote about the need for reform in the venture capital industry – while neglecting to mention Paul Graham and Y Combinator.

Michael Arrington did a nice job summarizing Dave’s main points:

1. “venture capital is broken because they are middlemen and they make bad decisions (lots of online pet companies in the nineties)”
2. “and people really need less capital now to start companies, and they need it later in the cycle”
2. “so companies should go right to the users, who often have money”
3. “but Dave ends his essay by saying that some companies will still need capital, and suggests forming a publicly held venture fund to supply this capital”

Paul Graham’s thoughts on the VC “problem” a year ago:

“You might think a high valuation is a great thing. Many founders do. But you can’t eat paper. You can’t benefit from a high valuation unless you can somehow achieve what those in the business call a “liquidity event,” and the higher your valuation, the narrower your options for doing that. Many a founder would be happy to sell his company for $15 million, but VCs who’ve just invested at a pre-money valuation of $8 million won’t hear of that. You’re rolling the dice again, whether you like it or not.”

The guy has a whole series of essays on why VC sucks and how to fix it. And it seems that Paul and partners are doing something about the problem.