Contrary to popular belief, the US venture capital industry is not a necessary condition in driving high-growth entrepreneurship.
According to Right-Sizing the US Venture Capital Industry, (pdf) a 2009 study by the Ewing Marion Kauffman Foundation, America's leading entrepreneurship think-tank, while venture capital will continue to be crucial to some forms of high-growth companies, the report concludes that the sector’s size must be reduced to be viable. The venture industry has seen stagnating and declining returns coupled with rapid expansion in venture capital assets under management in recent years.
The study says that there is no denying the importance of the venture capital industry. Despite being relatively young, having only reached its modern form in the last thirty years, this business of investing risk capital in growth companies has had many major successes. Some of the best known and most successful growth companies and brands in the world are venture-backed, including Apple, Google, Genentech, Home Depot, Microsoft, Starbucks, Cisco, and many others. The National Venture Capital Association, the industry’s main lobbyist, claims a study it sponsored shows that venture-backed companies from 1970–2005 accounted for 10m jobs and $2.1trn in revenues by 2005, as well as representing 17% of US gross domestic product (GDP).
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Author: Michael Hennigan
