Kauffman: Venture capital industry needs to shrink - Birmingham Business Journal:

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Only 16 percent of the 900 companiezs thatmade ’s list of the fastest-growinhg companies from 1997 to 2007 receivesd venture capital, the study found. Less than 1 percent of the estimater 600,000 new businesses a year that hire employeea are backedby VCs. The study said the VC industr needs to shrink because its returns are stagnatintg or declining while its assetes under managementare growing. Over a 10-yearr time frame, returns on venturre investments were 10 percent belosw the Russell 2000 Indexof small-cap stocks. The study notee that information technology and telecommunications are maturre andless capital-intensive now.
Plus, the stocjk market and potential corporate buyers are less intereste in young and unprofitable companies thanin VC’s “Venture participants now need to overcome their resistance to change, so they can most effectivelg fund entrepreneurs and offer investors competitive said Paul Kedrosky, a Kauffman senior felloww who authored the study. – Kent Hoover