You’re to quick to back down. Gerry Langeler commented “Nowhere, I repeat nowhere, has there been any plea from any responsible or representative member of the venture capital community looking for a bailout from the US government.” And you said he is right.

Here is a link of a podcast you can listen to of the President/CEO of the National Association of Seed Venture Funds, Mr. Jim Jaffe saying they are seeking federal money. http://www.thefrankpetersshow.com/2009/09/nasvfs_jim_jaffe.html#comments

Contradictory to Gerry’s post, he is obviously a representative member of the venture community, but is he responsible? Probably not.

They can’t promise their limited partners that they are going to make a lot of money while at the same time cry for federal assistance. They are damaging their reputations and hampering their ability to raise the next fund. Federal money if achieved will be offered to the winners, who don’t want it, the losers that are asking for it are not going to get it anyway.

The argument for Federal Money for job creation in venture startups does not hold water. When stimulus jobs are long gone, the communities will have new schools, roads, and other buildings and infrastructure to show for it. When a startup shuts down the community will have nothing to show for it.

The argument for state money on the other hand does make sense as long the amount of money a state puts in is augmented by a large enough amount of private money that is spent within the state. States compete with each other for job creation and other forms of revenue, but it doesn’t matter to the federal government which state those jobs are created in.

Just thought I’d back you up. There are those in the venture community asking for Uncle Sam’s help.

I do feel, however, that the venture capital industry has a somewhat inflated view of its own contributions. As I said in my post, there obviously are many many examples where VCs have backed companies that went on to make huge contributions to the economy and society. But I don’t think that’s the norm. I know you disagree with that contention.

Also, yes, there are times when the VC approach is probably the only and best financing choice available. (Amgen would be an example). But in other instances, I simply don’t think the VC approach is the most efficient way to create great new companies.

Sometimes, rarely, one has to dispense with the pleasantries that keep us all feeling like we are polite ladies and gentlemen. Anne Field’s blog post above is such a total crock that it deserves such a response.

Nowhere, I repeat nowhere, has there been any plea from any responsible or representative member of the venture capital community looking for a bailout from the US government. The fact that the NVCA periodically does a study to assess the positive impact of venture capital investments on the economy does not mean we, as an industry, have our collective hands out. It means that the NVCA, as our primary voice in Washington, wants to make sure the government doesn’t forget what we do, and why it matters, and in one of their fits of “fixing” something have them inadvertently hurt what already works.

A good example of that is the current move to lash together hedge funds (which are not capital creators, nor job creators, but simply financial engineers) and venture funds into the same bucket and then regulate us as one. That may well stop the abuses of the hedge funds that assisted in our current financial difficulties, but it will also do direct damage to the venture capital industry.

A similar move is about suddenly taxing carried interest as ordinary income. Last time I looked, if you invest in an asset (our carried interest in our funds, which we contribute cash to own) and that capital is at risk of loss and is illiquid for period of years (see: VC bubble-era funds for a real-life example), then any returns on that asset are taxed as capital gains or losses. The fact that some in the private equity world don’t actually have their personal capital at risk for long periods does not seem to faze those in Washington would change the rules and make what has always been a capital gain in venture capital an ordinary gain, just for this special case.

So, if maintaining what has been the status quo over the last 30+ years is Anne Field’s definition of “looking for a bailout” to her maybe this isn’t a crock. But it sure is to anyone with common sense, and sense of history.

Final crock-pot shot: Ms. Field’s piece points out that a majority of successful startups took no venture capital. True. But then she surmises that therefore venture capital is an industry than can be killed off with no material consequences (note: I did not say, “should be bailed out”). So, if she really thinks that we as a nation would be better off without the likes of Microsoft, Intel, Apple, Cisco, Google, Amazon, Amgen…..and the long list of world-leading, world-class examples of innovative, job creating, profit making, taxpaying engines fueled by venture capital, I guess that would be one opinion.

My opinion? That’s Bull%$#@!

More at: http://www.ovp.com/blog