Thomas Friedman in his recent op-ed in the New York Times, Start Up the Risk-Takers writes that Obama by giving another $20 billion bailout to General Motors and Chrysler is bailing out the losers and that GM has become a giant wealth destruction machine. He believes a better approach to creating jobs would be to give the money to the 20 best US venture capital firms instead.
You want to spend $20 billion of taxpayer money creating jobs? Fine. Call up the top 20 venture capital firms in America, which are short of cash today,… and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors’ upside and keep 80 percent for themselves.
If we are going to be spending billions of taxpayer dollars, it can’t only be on office-decorating bankers, over-leveraged home speculators and auto executives who year after year spent more energy resisting changes and lobbying Washington than leading change and beating Toyota.
As we invest taxpayer money, let’s do it with an eye to starting a new generation of biotech, info-tech, nanotech and clean-tech companies, with real innovators, real 21st-century jobs and potentially real profits for taxpayers. Our motto should be, “Start-ups, not bailouts: nurture the next Google, don’t nurse the old G.M.’s.”
Fred Wilson a venture capitalist and a principal of Union Square (an early stage venture capital fund) has a contray opinion and wote a great post on his A VC blog against the idea, A Stimulus Plan For Venture Capital? No Thanks. He believes that the venture capital business, has too much money, not too little, and that the top 20 firms are least in need of the money.
So Tom’s idea, while it looks good on paper, is a dream. The top venture firms don’t want, don’t need, and are never going to take government money. The same is true of the top entrepreneurs.
Stop bailing out the losers and give VC’s the money
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