Oppose Bailouts for Venture Capital Investors
As the Obama administration starts to talk about propping up small businesses with the next phase of the bailout, I’ve begun hearing noise from some venture capitalists and angel investors that the government should provide financial support to startups, early-stage venture capitalists and angel investors.
All I can say to this is “vomit.”
There are white papers being developed, politicians lobbied and it’s all based on the proposition that what’s good for small business is good for the United States.
I agree with the premise. In fact, my open letter to the Obama administration on what innovation policy should be details my support and how I think the government should be involved in these efforts.
But it shouldn’t involve bailouts or cash handouts to our industry. I find it offensive that high net worth angel investors or highly compensated venture capitalists along with their sophisticated investors need to be bailed out. We, as an industry, should be responsible for our investments and frankly, the current recession hasn’t affected our early-stage industry very much. Asking for government help is just being greedy and opportunistic.
Similarly, the entrepreneurs who take risks to create companies have the same risks today that they did previously. Yes, on the margin, it might be a bit tougher, but there are plenty of benefits as well, like lower priced rents and the ease of hiring good people.
To say that we should use the general public’s tax dollars to prop up our industry is wrong and I encourage people to openly oppose it to those that are starting to get behind the movement.
Jason Mendelson is a managing director at Foundry Group and recovering lawyer. He blogs at www.jasonmendelson.com.
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Knox Massey said on October 26, 2009
I have not heard of the “noise” you refer to about “bailouts” of angel investors (and/or VC’s). Perhaps you could be more specific?
Yuri Ammosov said on October 26, 2009
It looks like all the benefits you mentioned are on cost-side. What about revenue-side benefits?
Anonymous said on October 26, 2009
The true colors of the John Galt’s of the VC world are starting to show, I guess. Total independence from the Government as long as you are making money. if not, break out the begging bowls! Disgusting!
Kevin Moloney said on October 26, 2009
Well said. Any time and every time we ask governments for help, we give them more power. That is a fact, not an opinion. It also defeats the same free enterprise values, that make entrepreneurs and business leaders get better. Watching America – land of the free- becoming more steeped in socialism, is very sad indeed.
Joe Stafura said on October 26, 2009
In my dealing with the Venture community there has always been a strong government led influx of money in good and bad times.
We have one group that gives state tax money to start-ups, another group that give tobacco settlement money to start ups (and then takes 50% of it back from the small companies to pay the executives for “expert’ help) and another that uses US tax money to invest in military and health related start-ups.
Since Bush we have received a nice discount of money earned, 15% vs. 27-33% for working folks.
The idea that a bunch of Ivy leaguers are tough go it alone kind of guys is humorous, most of them are trust fund babies who got into school on Alumni preference.
Katheryn Barkes said on October 9, 2010
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