There's plenty of fretting in Silicon Valley and beyond over the venture capital industry, how broken it has become, and what needs to be done about it. Proposed solutions abound, with some favoring a government bailout, others saying the ranks of venture capitalists need to be slashed dramatically, and some proposing the creation of a market where equity in startups is bought or sold like shares of publicly traded companies. Each has its merits and weaknesses.

But in my view, what's needed is a fundamental rethink in the way startups get backing. VCs need to take a fresh look at when they invest, and for how long. VCs and other investors that have expertise in early-stage companies ought to invest at the outset for a few years, but then sell to companies that specialize in -- and have more to offer -- more mature companies. To understand why this approach makes sense, consider the shortcomings of the existing model.

Currently, many investors buy stakes early on and then add to those investments in later years. For instance, a typical early-stage firm might invest $3 million to $5 million in what's known as an A or B round. Then over the life of a startup, they'll put in another $3 million to $5 million to maintain their share of ownership and the rights that come with it. The model has been sacrosanct for the past 30 years.

A 10-Year Life But the wait for an exit, through an initial share sale or a buyout, can take a decade from the time of the A round. Remember that most VCs have a "life" of about 10 years. And if, say, a VC invests in a company in year three of its fund, there's a good chance the firm will be managing the investment past the life of the fund.

What's more, the time to exit is getting longer, not shorter. Companies like YouTube, purchased by Google (GOOG) for $1.65 billion less than two years after it was founded, are rare. In the future, big wins will more closely resemble Zappos, an online apparel retailer. Zappos is incredibly well run, and all VCs wish it were in their portfolio. But Zappos is having its 10-year anniversary this year, and it might be another few years before its exit.

Longer waits are bad not just for the VC calculating the return on investment [ROI]. They also result in impatience on the part of limited partners such as university endowments that invest in venture firms. It's also demoralizing for individual venture capitalists. There are many well-regarded VC partners that have never had an exit. Some venture capitalists are leaving the profession altogether and firms are shrinking.

Here's where secondary VCs can play a vital role.