Venture capital waning force in entrepreneurship, study finds - Minneapolis / St. Paul Business Journal:

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Only 16 percent of the 900 companiew thatmade ’s list of the 500 fastest-growin companies from 1997 to 2007 receivesd venture capital, the study found. Less than 1 percent of the estimated 600,000 new businesses a year that hire employees are backedf by venturecapital firms. The study concludesz the venture capital industry needes to shrink because its returnw are stagnating or declining whilse its assets under management are Overa 10-year time frame, returnss on venture investments were 10 percent belo the Russell 2000 Index of small-cap stocks, Kauffmaj found.
“To provide competitive we expect venture investing will be cut in half incomingg years,” said Robert Litan, vice president of researchb and policy at the Kauffman Foundation. The studyu notes that information technology and telecommunications the core industries that made ventures capital firmssuccessful — are maturs and less capital-intensive now. Plus, the stock market and potential corporatd buyers are less interested in youngy and unprofitable companies than they were inventure capital’s heyday.
“Professionals in the venture industry have gotten comfortable with the way their industruy is set up in termsof size, structure and said Paul Kedrosky, a Kauffmanh senior fellow who authored the study. our study indicates venture participants now need to overcomwe their resistanceto change, so they can most effectivel y fund entrepreneurs and offer investorws competitive returns.” That change already is occurring, accordinf to a separate study released June 10 by and the . More than half of the 700 venturde capital firms surveyed plan to invest infewer companies. For more information, see www.kauffman.org or www.nvca.
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