John Kerry’s Venture Capital Policy…
By Justin Gardner | Related entries in Economy, Money
So just a little background. I work for a technology startup called kozoru. We took on venture money (commonly known as VC or Venture Capital) about two years ago…along with angel investment (private investors). Needless to say, these are highly speculative investments that may very well fail. However, if they do pay off, they pay off BIG. And for more background, this type of money is what fueled the boom and bust of the 90s.
Now VC blogger Paul Kedrosky nails why John Kerry doesn’t understand the world of venture capital…
I hardly know where to start with this John Kerry letter to the Small Business Administration. In it he calls for an increase in the amount of SBIC money (i.e., state venture capital) going to minority-owned and women-owned businesses. While I would love to see more businesses run by women and/or minorities — and everyone else, for that matter — Kerry’s arguments are awry.For starters, greed is blind, so the whole idea that any remotely rational venture investor cares about gender, color, creed, or tracing skills is dubious at best. They want financial returns, and if it’s five-handed, blue-skinned hermaphrodites from Alpha Centauri who have the best deals, then, damn it all, five-handed, blue-skinned hermaphrodites from Alpha Centauri will get the preponderance of the venture money.
Second, the period is absurd. Comparing what happened in 2000 in venture capital to any other period is a recipe for nonsensical results. Take out 2000 and you see that the percentage of SBIC money to women-owned businesses has increased from 1.4% (2001) to 2.2% (in 2004), and the percentage of money to minority-owned business has increased from 3.3% (2001) to 5.2% (2004). Those are significant increases, even if the overall percentages are not huge as a percentage of the overall risk capital pie. Nevertheless, a) they are increases (contrary to Kerry’s assertion), and b) the numbers are representative of the number of VC-centric minority-owned and women-owned startups out there.
I can tell you for certain that this is reality. It’s not about race in the VC community. To Kedrosky’s point, we’d have “five-handed, blue-skinned hermaphrodites from Alpha Centauri” getting the money if they were coming up with the best ideas. Trust me, it’s true. Money talks and BS walks in this world.
John Kerry obviously doesn’t understand this even though the investments in minority and female owned startups have been going up in the past five years.
*sigh*
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February 17th, 2006 at 5:59 am
My bet is my wonderful Senator Captain Ketchup just wanted to claim businesses for women and minorities were not being helped by the EVIL Bush Administration (which according to Rapper Kanye West, a credible source on race issues because he’s black, Bush “hates black people”) with *yet another* pull of the race card.
So in the last month or so we’ve had Democrat race-baiters at:
Kerry in this post
Bryant Gumbel’s idiot comments on the Winter Olympics
Coretta Scott King’s funeral in general
Hillary in a harlem church.
Is this getting really old really fast to anyone else yet? As a member who generally leans towards the GOP on most issues, I have to say, for us all being racists, only the Democrats EVER seem to bring up race, usually in a fashion meant to polarize and divide, with brownie points if they can make Bush look bad while doing it.
February 17th, 2006 at 10:45 am
That picture makes Kerry look like a cross between Steve Martin and Jay Leno.
February 17th, 2006 at 11:58 am
I’ll bet there’s a pron site dedicated to just that…
February 17th, 2006 at 3:00 pm
For the most part I agree with you. Kerry seems to have taken the outlier (2000) and made it the baseline. I also agree that greed is blind, a venture investor is going to make an investment based on whether or not he thinks the investment is going to make him money not on the race of the people involved. But I could also see the possibility of an investor not thinking he’s going to make any money if the people involved are black, women, or (insert minority against which the investor is biased here)
So I don’t think it’s a good idea to just start giving more money to startups because they are run by minorities…sounds a bit racist. But it’s at least something to keep an eye on. Just don’t let a statistical whiz like Kerry crunch the numbers.
February 17th, 2006 at 3:28 pm
Equal opportunity is redundant to a liberal. What they are really interested in is equal outcome, and they want it now.
In order to achieve this within a free society where each individual has their own talents and motivations, authorities must actively discriminate in favor of those groups deemed “minorities,” and discriminate against those in the majority so as to level the playing field.
liberals subconsciously look upon the poor, brown “other” as a perpetual victim who is incapable of elevating their status on their own over time. That is why affirmative action is inherently racist at its core.
February 17th, 2006 at 6:10 pm
Bash away Jimmy, but do know that you’re only making yourself look bad. Don’t you get that this site is about NOT being the fringe?
But to address your point, liberals do care a great deal about the poor, regardless of race, culture or creed. In a society likes ours where so many have so much, we simply ask for more of a balance. This doesn’t mean Communism, but it does mean setting achievable economic goals, lifting up the middle and lower classes and not giving handouts to the wealthiest 2%. It also means making sure everybody who needs health care has access to it. We’re not there yet, but I’m going to keep pushing for that to be a reality.
And concerning affirmative action, it’s not a perfect system. But it addresses the inherent bias that we all have to be around those who are more like us. One of the reasons why more women and minorities don’t get hired is because white men like hiring other white men. They simply trust somebody more who is like them. That’s just human nature. Affirmative action can help with that, and maybe if some weren’t so eager to vilify it, perhaps it would work better?
February 17th, 2006 at 7:43 pm
You work for Kozoru? Huh. Gotta say, the whole thing with John Flowers and Google could’ve gone over a lot better… frankly, if I had been in your guys’ place, I doubt I would’ve even bothered trying to pitch to either Google or Apple. Apple wouldn’t be interested for the price you’d need to ask, simply because it doesn’t fit their business model, and Google… has Google ever bought another search company? Almost all of the acquisitions they’ve made have been of other companies only peripherally related to their core business (Blogger, Dodgeball, Keyhole, Picasa, etc). Actually, it kinda sucks, because I don’t think any of the search startups have much of a chance right now for a ‘flip’ liquidation event, except maybe to Ask.com or one of the other minor search engines. But seriously, good luck to you guys. From what I’ve seen so far, you guys have something really not half bad.
And yeah, I’ll second Paul’s assessment. Never been anywhere near VC money myself, but I’ve been watching it all closely enough to know Kedrosky is right.
Actually, come to think of it, I don’t think I’ve yet to hear anything all that good at all about SBIC. At least, not from anyone who wasn’t a politician.
February 18th, 2006 at 1:08 am
I never said they didn’t, they just care in a different way…by using government as a means to control wealth production and then re-distributing such wealth to individuals who have not earned it.
In this particular case we are not talking about the destitute who legitimately require a safety net, but business owners likely to make millions as venture capitalists.
…and not giving handouts to the wealthiest 2%.
Refusing to increase income taxes for the wealthiest Americans is not a handout. They money that rich entrepreneurs make does not by default belong to society.
Affirmative action adresses that bias in an un-libertarian, and racist way. If someone discriminates against hiring you because of your race, sue them! Fix the justice system, not the free-market place.
February 18th, 2006 at 8:26 pm
No Jimmy. They got tax cuts in the past 6 years, remember? And cuts on capital gains earnings. Those are handouts since their taxes were lowered. Your “increase” is simply returning it to levels where the same 2% same enormous prosperity in the previous decade.
The free market isn’t a cure all. In fact, it’s designed to be amoral. Given that, sometimes you need to have certain policies in place that give minority populations of any country a little more help. You see this as racist, but I think you’re grossly misusing that term. I never suggested, nor will I ever, that race begats superiority. It’s been shown time and time again that regardless of the race of the person, if you put them in the right environment, they’ll thrive. Affirmative action is a way to do that and overcome the institutional bias that has plagued us as a people for centuries.
And by the way, sue somebody because they didn’t hire you? Obviously, you didn’t understand my point about people’s bias towards wanting to work with somebody like themselves. It’s not about people being racist, i.e. saying “Well, he’s black so he’s not as smart as this white guy.” It’s about people being subconsciously biased towards hiring people of their own race and gender. It happens without one really even realizing it, but it’s their nonetheless. If you want to read a good book about this, pick up Blink by Malcolm Gladwell.
February 18th, 2006 at 9:09 pm
Fine, a tax cut is not a handout either. Again, money you make belongs to you not to the government by default.
Should black owned companies be forced to hire a certain percentage of white people, whom they otherwise wouldn’t due to subconsious bias?
Affirmative action is morally wrong because it perpetuates racial division. You need to continually identify which individuals belong into which groups, then decide which group is the “oppressed class.” You get nothing but identity politics year after year in our political institutions, resulting in a culture of political correctness which feeds into voluntary social segregation (like a Chocolate city).
The marketplace is not truly free if there is discrimination, either by affirmative action, or subconcious cultural bias. The solution is to make the market more free in both directions; once this is achieved, previously segregated minorities will catch up on their own. Forcing equity before people (or venture capitalists) are have aquired competitiveness is like picking at a wound to make it heal.
February 18th, 2006 at 11:02 pm
So I guess these SBICs are guarenteed by SBA debentures & securities. Kind of takes some of the “venture” out of the “capital”, no? So couldn’t they tailor the regs to guarentee investments in more minority owned startups?
Jimmy, the Brilliant Moderate Voice of the Most Holy Justice Sandra Day O’Connor has held that Affirmative Action won’t be morally wrong for another twenty-five years or so and then the problem will have fixed itself and then it will be morally wrong.
February 19th, 2006 at 3:34 am
Yes, they should. It should work both ways.
February 19th, 2006 at 12:44 pm
Good luck trying to force Grambling State University to make their incoming freshman class 62.5% white, considering thats the percentage of white people in Louisiana.
God forbid you are ethnically Chinese, Korean, or Indian. The government will force Engineering firms and Biotech labs to staff at less than 5% asian nationwide (thats including Hawaii).
February 20th, 2006 at 2:09 pm
Having spent a fair amount of time around VCs and venture backed companies, I think it’s a little glib to say VCs can’t possibly care about race, because all they care about is money. It’s a well worn truism that what the VCs are betting on in a large part is the management team, and any prejudices they may have about the team will be reflected in their willingness to back a company.
And Brian, affirmative action isn’t “race baiting.” There are certainly arguments against it, but don’t start throwing around inflammatory terms that don’t apply simply because they fit your agenda. I guess you would agree that every Republican who says Condi Rice would be a good nominee because she would get a lot of the traditionally Democratic black vote is “race baiting”?
April 6th, 2006 at 11:31 pm
I truly hesitated to write this response and to even read through the responses given thus far. But having happened upon this site i’ll be quite brief when i say of all the banter about affirmative action, it just seems that people would be a little more apt to recognize the need to rectify the injustices of this country’s historical leadership and proletariat support seeing as how the wealth of the United States of America was built quite literally based on a free-labor and discriminatory system otherwise known as African slavery. Consider: free labor for hundreds of years plus discriminatory practices and holocaust of human beings solely for the purpose of creating wealth for white people. I don’t know if its that you guys are young or just plain old idiots, but turn the tables and ask yourself what you’d want if white people were enslaved, discriminated against, wrongfully imprisoned, miseducated, psychologically tormented [the list of atrocities goes on and on] for hundreds of years in this country. Would affirmative action be such a thorn in your side then? Let me guess, can’t even fathom it, right? Please go and read some good books like James Baldwin’s The Fire Next Time, Chief Malopa’upo Isaia’s Coming of Age in American Anthropology, George M. James’ Stolen Legacy and if you are even the least bit scholarly you will find a myriad of additional profound writings that may aid in releasing you from the comfort zone of your own ignorance. And I mean that in a good way.