Traditional(?) VC Model: Broken or Forgotten

Stowe Boyd had some insightful thoughts on Miguel Helft's New York Times article A Kink in Venture Capital's Gold Chain. That article, at a high level, questioned whether the traditional venture capital model is broken because of excess capital and tight exits.

Stowe and Fred Wilson both noted that the model isn't broken, it just needs some tweaks. In particular, they both suggest that smaller funds, smaller investments, with smaller exit requirements could be the answer.

I agree with those sentiments, with a slight twist in wording. I don't see smaller, earlier investments as a tweak to the traditional VC model; rather, I see that as a return to the "traditional VC model". The late '90s, early '00s focus on double digit and triple digit million dollar investments, with hopes of billion dollar exits was an anomoly. The industry was built on investing single digit millions, from modest-sized funds and building sustainable businesses. One twist for some funds might be a focus on quick flips, but that's not how I learned the business.