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Those of you who read my story today on the future of venture capital funds might find this piece by Xconomy’s Bruce Bigelow interesting.

Bruce recently talked with Stan Fleming and Ivor Royston, founders of Forward Ventures, one of San Diego’s most successful venture capital firms. Neither was shy when it came to voicing concerns about whether the traditional venture capital funding model will work anymore.

Royston is particularly concerned about a widening “funding gap” for early-stage drug development, as venture capital firms have increasingly focused their investments exclusively on compounds already in or approved for clinical trials. He says the trend stems partly from the recent dearth of IPOs for venture-backed biotechs, which makes it far harder for VCs to recoup their investments in early-stage deals within the 10-year lifespan of most venture funds.

“The business guys have proven pretty conclusively that it’s not working,” Fleming says of VC investments in early-stage biotechs. “It’s requiring some new approaches, particularly on the business side, so we’re not [invested] in these companies forever.”

Royston added that like so many businesses these days, his firm will have to do more outsourcing to stay competitive.

DAVID WASHBURN

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