For years I have been reminding people that less than 5% of firms ever take any kind of venture investment — that is one of the reasons I find the growth of business plan competitions so odd. Why prepare students for pitching to Venture Capitalists when most of them will never do it? (We’ll answer that in another post).
Well, there is a growing chorus of entrepreneurship bloggers sounding the alarm that policy makers are focusing too much on the VC model when talking about economic recovery.
Growthology (a blog out of Kauffman) and The Entrepeneurial Mind (Jeff Cornwall) have both pointed to a study by Paul Kedrosky of Kauffman: Right-Sizing the US Venture Capital Industry. From the study (p.5):
External capital is sometimes required by some private companies in their early stages, and it is good that there is a class of professional investors with enough financial resources to provide that assistance when it is needed. However, venture capital and entrepreneurship are separate phenomena, even among growth companies, and conflating the two, let alone implying that the former causes the latter, is untrue and unhelpful.
This is a short paper and well worth reading. Thanks to Kauffman and Kedrosky for putting this out there.
Like this:
Like Loading...
