The smartest way to spend $20 billion. . .
February 23, 2009
Thomas Friedman suggests the best way to allocate $20 billion is to “Call up the top 20 venture capital firms in America, which are short of cash today because their partners — university endowments and pension funds — are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors’ upside and keep 80 percent for themselves.” I don’t necessarily agree we should be spending another $20 billion we don’t have, but we all know that it is going to get spent - why not spend it on something that might provide a return (unlike a Detroit bailout).
Connie Lolzos explains that many VCs have criticized his proposal suggesting, “there’s been no shortage of observers quick to point out that top venture firms hardly need $1 billion a piece from the government — and that most wouldn’t want to deal with the scrutiny that the money would invariably entail anyway. (VCs, especially the country’s “top” VCs, many of whom are billionaires, aren’t particularly well-known for their austere lifestyles.)” Tom Simpson of NWVA explains, “just like what has happened with TARP, it is not clear to me that additional cash would stimulate a higher level of investment. Moreover, the top 20 VC funds don’t need to raise money from the US government, nor would they want too adhere to the restrictions (salary caps) that would be associated with taxpayer money.”
But I ask ‘why?’ Why include strings that Harvard’s endowment doesn’t require? Why set salary caps? Why not simply accept the same terms that all limited partners agree to when they invest in Venture Capital funds? Why do we turn ’stupid’ whenever we invest our money (i.e. taxpayer money)? Avoid ‘uncomfortable strings’ and let the firms focus on providing the maximum return. Let them buy whatever they want with the upside - private jets, tanks, islands, buildings, football stadiums - whatever (fyi - Americans build all of that cool stuff that wealth buys).
