--- Keith Nagel wrote: Jed writes: > >I have nothing against capitalism. But cold fusion is still at the fundamental research level, and there is no way a venture capitalist can invest in it. > True, but for the reason I state: there is no property protection so no sane businessperson would invest in it.
Both of these statements are generally correct, but are somewhat overly critical of an appropriate resource (for certain situations). The purpose of VC is more limited then Jed is suggesting (hoping for). R&D especially at a rather basic level - is not a key focus for this resource, although some is done - rather its prime purpose is getting a fairly well-developed research project from the stage of working protoype into mass production, and getting there "first" i.e by saving 3-5 years over going the normal plodding way of dealing with banks and IPOs, even the SBA is painfully sloooow. Of course, that speed is not for everyone, as you give up most of your control over the project. Therefore, this is by nature a limited resource and accounts for only 3% of all industrial funding. However, as you will see from the paper below, VC has 5 times the "bang for the buck" as other funding sources, as to its impact on innovation - which is surprisingly substantial, despite its limitations - and that is going back a long ways. In more recent years the impact of VC is arguably even **more** substantial, due to the lack of federal money following overseas oil-wars, and tax cuts for the wealthy. The National Bureau of Economic Research is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. They have looked into this: http://www.nber.org/papers/w6846 NBER Working Paper No. 6846 ---- Abstract ----- While policymakers often assume venture capital has a profound impact on innovation, that premise has not been evaluated systematically. We address this omission by examining the influence of venture capital on patented inventions in the United States across twenty industries over three decades. We address concerns about causality in several ways, including exploiting a 1979 policy shift that spurred venture capital fundraising. We find that the amount of venture capital activity in an industry significantly increases its rate of patenting. While the ratio of venture capital to R&D has averaged less than 3% in recent years, our estimates suggest that venture capital accounts for about 15% of industrial innovations. We address concerns that these results are an artifact of our use of patent counts by demonstrating similar patterns when other measures of innovation are used in a sample of 530 venture-backed and non-venture-backed firms.
