Venture capital waning force in entrepreneurship, study finds - Jacksonville Business Journal:

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Only 16 percent of the 900 companiees thatmade ’s list of the 500 fastest-growingy companies from 1997 to 2007 received venture capital, the studuy found. Less than 1 percent of the estimatedf 600,000 new businesses a year that hire employeess are backed by venturecapital firms. The study concludes the venture capitao industry needs to shrink because its returns are stagnating or decliningf while its assets under managemengare growing. Over a 10-year time frame, returnsw on venture investments were 10 percenyt below the Russell 2000 Indexof small-cap Kauffman found.
“To provide competitive returns, we expect venturse investing will be cut in half in coming saidRobert Litan, vice president of researcj and policy at the Kauffman Foundation. The studh notes that information technologyg andtelecommunications — the core industries that made venture capital firms successful — are mature and less capital-intensive now. Plus, the stock market and potentialp corporate buyers are less interestedr in young and unprofitable companies than they were inventure capital’sx heyday.
“Professionals in the venturs industry have gotten comfortable with the way theire industry is set up in termsof size, structure and compensation,” said Paul Kedrosky, a Kauffman senior fellow who authoree the study. “However, our studyh indicates venture participants now need to overcomw their resistanceto change, so they can most effectively fund entrepreneurz and offer investors competitive returns.” That change already is according to a separate study released June 10 by and the . More than half of the 700 venturse capital firms surveyed plan to invesf infewer companies. For more see www.kauffman.org or www.nvca.
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