John Danforth: “Recently, a number of legislative initiatives have been launched that would have the government play an active role in…”

“Recently, a number of legislative initiatives have been launched that would have the government play an active role in the creation of venture capital firms. The underlying rationale is simple: There is, according to the sponsors, a shortage of risk capital in the United States, particularly capital aimed at early-stage ventures. As evidence, people point to the decline in professional venture capital commitments in the most recent 8 years. I, personally, believe no such shortage exists. I have yet to see a good idea and team not get funding, and I have seen many bad ideas (and/or bad teams) get funding. I should also note that all attempts by the Government to direct investment have enriched the wrong people--lawyers, accountants, and promoters. The record for State initiatives in venture capital is disastrous. Loan guarantees are like heroin: They give promoters the upside, leaving the taxpayer holding the bag if the investment doesn't work out--not my idea of a sensible policy.”