Does Venture Capital Work for Emerging Technologies like Nanotech?

I think if you really pressed your typical venture capitalist on the origins of the universe, they might hedge a little but they would be forced to at least concede that whatever the origins might be, venture capitalists were surely at the center of it.

Thatâ''s why I got a chuckle from this headline on the political blog Huffington Post: â''Why Venture Capital is Key to Our Economic Recovery.â''

No sense in doubting that proposition because as the article quickly posits, â''One of the proven methods of deploying equity to finance innovation and the creation of new enterprises is venture capital.â''

It just depends on what you mean by â''provenâ''. Last November, the prickly egos of VCs were upset by a presentation given by Adeo Ressi at the Harvard Business School in which it was argued that the VC Industry is Broken.

As evidence of this, Ressi pointed to the fact that over the last five years returns on VC investment have fallen below the amount invested (see graphic below).

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Whether this really constitutes the VC industry being broken has been hotly debated over the last months. But over at TNTLog the question of how venture capital has fared in nanotech has been chronicled and it has not been a pretty picture, see here and here, and even in a prescient moment six months before Ressiâ''s presentation the question was posed: Can the VC Model Handle Emerging Technologies?

In any event, before venture capital becomes the cure-all for what ails our economy, it might be time to take a second look at whether the forty-year-old VC model even works for emerging technologies.

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