In the last couple months, some of the biggest names in tech start-ups have delivered a sharp bit of criticism to their fellow entrepreneurs. Their message (paraphrased): “You should be tackling bigger ideas.” 

Mark Zuckerberg said it. Investor Ben Horowitz hinted at it. And Yammer’s David Sacks declared it--riling up Silicon Valley in the process--as he lamented the dearth of big ideas left for the taking. 

So what, exactly, is Silicon Valley's problem?

Here's one theory: “An entrepreneur working on groundbreaking robot technology recently joked to me that he'd have an easier time raising money if his robots were virtual and existed only on Facebook,” Chris Dixon, angel investor and CEO and co-founder of Hunch, recently wrote in a blog post about the conundrum of “meaningful” start-ups. “He was only partly joking. His start-up will require a lot of capital and doesn't have an obvious near term acquirer. Only a small group of VCs today will even consider such an investment."

Big ideas need ambitious founders, and by all accounts there is no shortage of those. But big ideas also need ambitious investors who are willing to stick around and nurture them--no matter how long it takes. Here's where there might be a problem.

Where Have All the Risk-Taking VCs Gone?

If you read the headlines, the venture capital industry appears to be thriving. Buddy Media, for instance, was acquired for nearly $700 million in May. Yammer, the enterprise social networking site, was acquired for $1.2 billion in June. And despite its current stock price, Facebook raised $16 billion in its IPO, making several of its investors billionaires. But for the most part, these giant exits have become an anomaly--an exception to the rule.

Cambridge Associates, which monitors the venture capital industry, found that VC returns were scraping a 10-year low in December 2010. In May 2012, the Kauffman Foundation released its own study of 20 years of venture returns. The results were much the same.

"Venture capital has delivered poor returns for more than a decade," the authors noted. "VC returns haven't significantly outperformed the public market since the late 1990s, and, since 1997, less cash has been returned to investors than has been invested in VC. Speculation among industry insiders is that the VC model is broken, despite occasional high-profile successes like Groupon, Zynga, LinkedIn, and Facebook in recent years."

In fact, only 20 of the 100 venture funds Kauffman studied generated a return that beat a public-market equivalent (like the Russell 2000, a small-cap stock market index) by more than 3% annually.

Venture capital is in more than just a slump; it's in a full-blown identity crisis. Some VCs, like Shani Shoham, argue that there just might be too much capital in the market. Others go a step further, arguing that modern portfolio theory--the idea that higher risk correlates to higher reward--is flawed. "In the venture capital business, everything seems to go haywire," writes Victor W. Hwang, the founder of T2 Venture Capital. "Risk and reward are not correlated, as a blackboard economist might expect. As one invests in earlier stages of company growth, the risk premium basically disappears, if not completely inverts."

If that's how the risk-reward equation works, why back a dreamer with grand ambitions that require years to realize when you can invest in smaller, proven ideas that are likely generate returns more quickly?

The Case for Big Ideas

Among the Silicon Valley VC community, at least one firm has made it its mission to be the backer of big ideas. Founders Fund, which was founded by entrepreneur and investor Peter Thiel in 2005, operates according to the idea that VCs have an obligation to support ambition.

"Venture investing shifted away from funding transformational companies and toward companies that solved incremental problems or even fake problems," the company's mission statement notes. It goes on to conclude, "We wanted flying cars. Instead we got 140 characters.”

If you look at Founders Fund's portfolio, you'll see ambitious companies in non-traditional tech verticals like aerospace and biotech pursuing ideas that will take years to generate revenue. It’s still a venture capital firm with limited partners who demand returns, so not every company falls into the big idea camp. But unlike most, Founders Fund is willing to commit to a higher level of portfolio risk based on one fairly simple axiom: that not taking risks is the biggest risk of all. 

"If you invest in a real technology, you should always have a chance to do 10x [returns]," says partner Bruce Gibney. "That's the hard-headed business-school reason why VCs have to be evangelists for major ambition. A lot of capital has been wasted in ultra-mature companies. Most companies still fail. But you have to be backing major disrupting technologies." 

Big Is in the Eye of the Beholder 

Even when investors have the means and the gumption to make ambitious bets, the defintion of a "big idea" depends on which investor you talk to. What's 140 characters to one firm is something much more important to another.

"The big ideas tend to be really big in hindsight, not in foresight," says Peter Fenton, a managing partner at Benchmark Capital. "In my experience, what's common among the companies that have broken out to be sensationally big was No. 1: a narrowly focused starting point. It wasn't an abstract, grandiose idea. It was a hyper-focused, laser-like precision on an experience those companies are trying to create, but then it grows and compounds."

Benchmark invested in Twitter when the company had just 25 employees and was being lambasted by the media as a trivial mode of social networking.

"The criticism took the form of ‘How superficial is this little thing,'" Fenton says. "What we didn’t know about the big idea--the profoundly big idea--is that Twitter brought you closer to people." Twitter didn't set out to help facilitate citizen uprisings. It started with 140 characters and, some might argue, only became a big idea by chance. 

Part of the problem is simply baked into venture capital's business model: Investors typically only give entrepreneurs a runway of about 18 to 24 months--often regardless of the nature of the idea. The founders can can iterate, pivot, whatever--but there are revenue expectations at the end of that runway.

"Sometimes, there's a feeling that something has to be proven over a period of time and that really big ideas don't work that way," says Jeff Clavier, the founder of SoftTech VC, a seed investment firm based in Palo Alto. "Capital efficiency and big ideas are two divergent forces where sometimes it just takes a lot of money to prove something massive. Yet if you look at companies in the consumption space, like Uber and Airbnb, they were able to prove themselves on a relatively small amount cash."

Go Ahead, Think Big

Fenton sees hundreds of business plans and decks each year. The good news for entrepreneurs, he says, is that there are still plenty of big ideas left in the world. It just takes a narrow focus to get the company off the ground. 

He, like Clavier, points to Uber as a good example. The start-up began with a simple idea: Connect people who need taxis with the taxi drivers who need fares. But building a taxi-searching company is hardly what the founders planned to do, he says.

"It's going to look like an extraordinary big idea in 10 years," he says. "Black cars on your cell phone seems like a small idea. But they're deeply ambitious about bringing that to the world, and guess what: This notion of turning the phone into a remote control for the world is a really big idea, but it's done through a very concrete focused starting point."

In other words: Think big, but act rationally. Investors will always care about sea-changing ideas, but the economics of their industry aren't likely to change anytime soon. So, entrepreneurs still need to build a product people actually want to use within the time frame the venture capital model requires.

"The beauty of our world is that there's always an entrepreneur out there with an idea that no one else cares about, and no company would fund rationally," says Fenton. "But they pursue it with reckless abandon, and occasionally they go and discover something as fundamental or primative as the telephone."