Good ideas, money to back them, grow in US
Is America's entrepreneurial spirit declining? As the nation broods over its long-term decline in productivity growth, mulls over its industrial policy, and frets about protectionism and overseas competition, the question continues to spawn some serious soul-searching.Skip to next paragraph
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It even surfaced in a General Accounting Office (GAO) report to the congressional Joint Economic Committee on venture capital last summer.
But the people most interested in that report - the venture capitalists themselves - answer that question with a resounding ''No.''
These businessmen and women, who use pools of private money to fund company start-ups in risky and sometimes obscure high-technology areas, say the old-fashioned pioneer spirit of risk-taking is alive and well and living in America.
Year-end telephone interviews with venture capitalists and bankers around the nation suggest that:
* Venture capital is critically important to maintaining America's lead in international high-technology competition.
* There are growing numbers of entrepreneurs with good ideas waiting to be funded.
* There is a large and growing supply of money to fund them.
* Increasing amounts of venture capital bring increasing numbers of good ideas to the surface.
''There's been a steady increase in the number and quality of ideas over the last two to three years,'' says Michael Bell, president of the National Venture Capital Association and a partner in the Hixon Venture Company of San Antonio.
Peter Brooke of Tucker Anthony Associates, one of the largest venture capital firms in the nation, managing some $250 million in assets, agrees. ''The money coming into (the industry) now,'' he says enthusiastically, ''is forming new enterprises that you and I haven't even heard of, and that will be the lifeblood of this economy in 10 years.''
And Stanley E. Pratt, president of the Venture Economics Division of the Capital Publishing Corporation in suburban Boston, traces the ideas that produce good business deals back to the people who have them. ''One commodity we are not short of in this country,'' he says, ''is entrepreneurs.''
And Mr. Bell adds that ''the hardest part of our job (is) sifting the chaff from the wheat.''
They are not always easy to locate, however. ''There always seems to be too few deals,'' complains Charles Weight, a partner in a New York-based but French-backed venture capital fund, Elf Technologies.
When they are found, however, entrepreneurs need what venture capitalists provide - someone willing to risk money on their ideas. ''Capital,'' as San Francisco venture capitalist Thomas Perkins says, ''creates opportunity.''
Mr. Pratt, a highly respected scorekeeper for the nation's venture capital funds, confirms that 1982 was the industry's biggest year ever. According to his estimates, America's total pool of venture capital reached a record $7.5 billion - nearly tripling the 1977 figure. Last year, he says, the pool apparently grew by about $1.6 billion - well above the $1.3 billion increase recorded for 1981 and leagues ahead of the paltry $39 million recorded five years earlier.
That $1.6 billion, however, needs to be seen in perspective. It is still no more than the annual research and development budget of IBM. The $7.5 billion total is only a fraction of total US investment wealth - which includes, for example, an estimated $250 billion in the nation's pension funds.