The socialisation of venture capital

By Milo Yiannopoulos on April 24th, 2012

Just a few quick thoughts, as I prepare to wrap up for the day. Yesterday, GigaOM’s Bobbie Johnson shared some statistics, ultimately sourced from the Economist. “In 2007,” he wrote, “governments were responsible for just 9.9 per cent of all money put into VC; by last year that had risen to a staggering 39 per cent.”

Everyone knows why this is happening: European funds have consistently failed to return money to their investors, so the limited partners VCs would normally hit up for their next fund are growing much more cautious about putting more money in. Understandable, from the LPs’ points of view, but am I alone in finding the replacement of pension funds by giant and nebulously defined European slush funds rather troubling?

This trend seems to be accelerating: the latest large-scale deployment of public money was the $100 million fund recently announced from Notion Capital, which contains a heavy public fund component in its make-up. The question is: should we be worried about risky and red-blooded financial horseplay being effectively suborned into the public sector?

Is European venture, which has under-performed for decades, really the best place to put public money as European governments start to institute austerity regimes? Why should taxpayers shoulder so much risk when so many European venture capitalists have proven themselves so incompetent? And what are the consequences for venture funds who take public money: are they hamstrung with social entrepreneurship objectives or other sorts of social engineering clamped on to their investment terms?

Do we want venture capital to turn into yet another branch of government? I’m keen to hear your views.