Friday, June 12, 2009

Study: U.S. Venture Capital Industry Needs To Shrink

A study released this week by the Ewing Marion Kauffman Foundation concludes that the U.S. venture capital industry needs to shrink, in order to resuscitate the industry. According to the study, "Right-Sizing the U.S. Venture Capital Industry," the nonprofit foundation, which studies and encourage entrepreneurship, concluded that venture capital returns have been stagnating, all due to a rapid expansion in the amount of venture capital under management in the U.S. The study was authored by Paul Kedrosky, a Senior Fellow at the foundation. The study concluded that the decrease in venture capital returns predated the economic downturn, and came after an rapid expansion of venture capital assets under management in the late 1990's. The study claimed that because of the amount of capital, and lackluster returns, the asset class has become uncompetitive with other alternative investments.