Venture capital firms are down. Hey, let’s raise their taxes

October 14, 2009

First this from Reuters:

In the first three quarters of this year, only 86 U.S. funds raised money, according to data compiled by the Venture Capital Journal and the National Venture Capital Association. It the trend is maintained, by year’s end there will be somewhere between 104 and 118 new funds. By comparison, even in the blackest days of the dot-com bust of 2001, investors averaged 234 funds a year.

And this from the NYTimes:

House Democrats are planning to renew their fight to raise interest on carried interest, the share of profits that buyout shops and venture capitalists receive after they successfully cash out of portfolio companies and return money to their investors.

Me: First, don’t expect the Senate to go along with this idea. Second, I don’t see how this helps America’s innovative capacity. Surely we don’t want Uncle Same to be the only source of venture capital. BTW, candidate Obama suggested creating something called a “Clean Technologies Venture Capital Fund” and investing $10 billion a year in emerging energy technologies.

Interestingly, a study by the University of British Columbia looked at the performance of the Canadian government’s venture capital efforts. It found that government venture capital isn’t nearly as successful as private venture capital.

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