Good news for Innovators: Venture Capital is Back!

(Image: U.S. Treasury Access to Capital Conference Presentation)

Policy-makers, economists, investors, economic developers and I have lamented for the past few years the fact that private sector capital had not yet gotten back into the game.

The good news for innovators is that in 2010, the venture capital (VC) sector came roaring back, putting $26.2 billion into 2,799 venture deals, a spike of 11 percent from 2009 and a major sign that formerly wary VCs have begun to come off the sidelines, according to a study by Dow Jones VentureSource.

The promising data also showed that 2,636 deals took in $23.6 billion, with the fourth quarter alone raising $7.6 billion through 735 deals — a 6 percent increase in capital invested from the same quarter a year prior.

Private capital is an essential ingredient in the recipe of American innovation and job creation. The willingness of private investors to take the risks in funding disruptive technologies and new business models is responsible for creating entire new industries that today employ millions in high paying jobs in the very industries now sought after by our graduates.

Impact of private capital investment on job creation

Venture Capital Impact

In 2008, venture capital-backed companies employed more than 12 million people and generated nearly $3 trillion in revenue. Respectively, these figures accounted for 11 percent of private sector employment and represented the equivalent of 21 percent of U.S. GDP during that same year. These findings extend trends regarding venture capital’s outsized impact – or “ripple effect” – on the U.S. economy that stretch back to 2001.

Venture-backed companies

Moreover, other countries have developed financing and investing tools such as sovereign wealth funds, which are government investment funds, funded by foreign currency reserves but managed separately from official currency reserves. Basically, they are pools of money governments invest for profit. Often this money is used to invest in foreign companies, i.e., American companies.

The U.S. does not fund private sector investment through sovereign wealth funds. The closest we’ve come is the hundreds of billions of dollars in a taxpayer-funded bailout, where the U.S. has held and still holds investor positions in private companies. These investments were clearly triggered by the financial crisis and few believe they are long-term positions for our government.

As America relies on private capital to fuel innovation and entrepreneurship, which results in increased national competitiveness, it is good to see it back in the game – in a big way.

I know it’s early, but 2011 is trending positively for innovators.

Johnathan M. Holifield, Trim Tabber

Forbes: As cash piles up, corporate venture capital rises again


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5 Responses to “Good news for Innovators: Venture Capital is Back!”
  1. Ralph L. McNeal, Sr. says:

    Was a venture capitalist for over 20 years. Involved in financing some of todays “Black Titans” Some of us are still around, but we fought the continuing discriminatory attitudes of the financing industry and often those board members that were suspect of black management. From where I sit, watch and wait, things haven’t changed that much. To understand black venture capital you have to trace the history from about the late 60s When the only VC firms doing anything were Payson & Trask and the Rockafellers.When the Park Sausage, Baltimore, MD. became the first black-owned public company (69). Those that participated across the country spread the risk through hundreds of brokerage firms. Some of the companies we put on the map: Essence Communications, Uniworld Group, Station W.I.L.D, TV Stations, Trucking and Transportation Companies, Black Hair Care Companies, etc. . Some of us were responsible for the government’s 8-A program, Department of Transportation’s ICC MC107 that made it possible for minority and economically disadvantaged transporters to have access to government freight. The next bastion of VC will entail water desalination, solar power, waste reclamation and infrastructure financing. New and innovative technology and Bio-technology will always be around. I think our problem with the Civil Rights of Minority-owned Businesses…is that we’re not asking to create firms to do the second and third financings…the reason none of very few..if any exist.

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