Joel Spolsky has a long discussion on what is wrong with venture capital and how to fix it. He speaks as one who has not taken VC money. I too am in a similar boat (though I had tried many times and failed during the IndiaWorld days). But I don’t think one can be as harsh on the VC approach as Joel is.
I think VCs plan a very important role in the innovation ecosystem. Not all entrepreneurs have capital to start with and neither are many of the companies they create profitable from day one. So, there is a “credit constraint”. This is where VCs come in with risk capital. Of course, entrepreneurs can choose not to take the cash (and the strings that come with it). At that point, though, the entrepreneur is keen to make the idea fly. Complete ownership of an idea is not as important as making it a reality. Its only when the idea is successful (perhaps, thanks to the capital infusion and the assistance received from VCs) that maybe the equity was given away too cheap! This is part of life!
In India, it is now on the other extreme: VCs have become too cautious (almost like bankers). The result: it is rare to see a new company get funding. (Well, this situation is probably true globally.) The irony is that it does not take a lot of money to get good ideas off the ground. The domestic market in India (and by extrapolation, other emerging markets) need affordable and innovation solutions. Where are the entrepreneurs and the VCs?