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.