My comments can be perceived as negative, yanking the chain of 700+ U.S. venture capitalists, of which many use sub-prime tactics. Or they can be perceived as positive, with the majority of those investors looking the other way now is a great time to start a new investment vehicle (more on that later) that returns to Limited Partners (LPs) the allocation in the technology asset class they were promised.
A new group I see springing up are the people who use the negative interpretation to chastise the US as a whole, extrapolating that the US is “losing ground internationally on multiple technological fronts.” That is where, with my international experience (an ex-pat ready to naturalize) in tow, I need to put a full-stop to the criticism against this country.
Here is why:
1/ Not only does the U.S. represent an excellent breeding ground for investing in innovation, but more importantly, the US represents a societal curiosity to adopt and purchase those unproven innovations like no other country in the world. Technology investments will coagulate where the early buyers are.
2/ The U.S. has the un-canning ability to bounce back because, in essence, every citizen is an entrepreneur (forced perhaps by the lack of safety nets). It may not be easy to bounce back, but adaptability is part of this country’s DNA – not so elsewhere.
3/ Investors in the U.S. have a short-term memory; they need to put their money “to work.” Technology remains an exciting asset class because of its early potential, low-cost, quick impact, and large-scale. So, with the new risk assessment criteria for VC funds in place, new investments will flow again quickly. BTW: those investors (LPs) are not just American, the amount of sovereign funds investing in U.S. technology is significant and growing (not in the least because of bullet 1).
The United States will remain at the forefront of technology innovation if it acts on critical opinions that lead to improved self-regulation. We collectively need to turn the current technology “investment club” into a free-market that embraces the curiosity and meritocracy that this country was founded upon.
The VC business will re-invent itself, either by people like me who aim to expose and correct its current flaws or (a few years later) by the Limited Partners who invested in VC firms with suboptimal returns. Either way, no innovation exists without the induction of significant pain or gain.