Jonathan Aberman, managing director of Amplifier Venture Partners, has published a white paper discussing the problems and challenges to the private venture capital model and offering policy recommendations to the Federal Government to address these challenges.
In the White Paper, "The Decline of the United States Venture Capital Industry: What the Federal Government Should Do About It", Aberman argues that addressing the shrinkage of the private venture capital industry and the loss of countless experienced company builders is a matter of urgent national economic policy.
The venture capital industry is becoming configured to make larger investments in less innovative companies, as it is driven towards making less risky investments to satisfy the current investment preferences of its institutional investors.
As the venture capital industry is moving away from more speculative investments, particularly early stage investments and investments in emerging technologies, the US economy is losing a primary driver of technology commercialization.
As noted recently by the National Venture Capital Association, more than 21 per cent of the 2008 United States GDP was provided by venture capital backed companies. Aberman argues that government action to promote the formation of early stage focused venture capital funds, and actions to promote a closer career progression between government and private sector technology commercialization are necessary for the US to continue to benefit from venture capital’s important role as a driver of economic development.
"I am not suggesting a VC Bailout," says Aberman. "The market should continue to reward and punish investors on the most important criteria – do they provide profits for their investors. However, we need to recognise that at this moment in our nation’s economic development we need more early stage capital and experienced company builders, not less. We should act in ways that would be consistent with the private market and provide the ground work for the next generation of industrial development and entrepreneurs."
