I gotta hand it to Marc Andreessen and Thomas Friedman–they both nailed it this week and repeated a message I’ve been preaching for the last year on this blog, in my book talks and in my work for BusinessWeek.
It is the idea that the entrepreneurial economy will play a key role in lifting America’s economy out of the recession. But each of them addressed the challenge in a slightly different though related way.
Andreessen broke the news during an interview with Charlie Rose that he is starting a new venture capital fund focused on investing in young and unproven companies with big ideas. I find it really fascinating that the best entrepreneur of his generation has decided to take off his operating hat to become a full-time venture capitalist.
Andreessen must believe, as I do, that this is actually a very good time to be in venture capital, as long you are able to raise money, of course. Although Andreessen has never been a professional VC, I am sure he’ll be able to easily raise a modest to large-sized first fund based on the reputation of himself and his partner, Ben Horowitz, and the fact that he’s gained a lot of experience the last few years doing dozens of angel investments. This is great news for entrepreneurs, and I can’t wait to see how Marc shakes up the industry.
One of the things I’ve been saying on book tour is that one of the great ironies of venture capital is that an industry all about promoting innovation has not been very innovative itself the last 30 years. So I hope that the financial crisis will lead us to try to experiment and create new approaches that can help finance and stimulate innovation.
Which brings me to New York Times columnist Thomas Friedman. In his column today, titled “Start Up the Risk-Takers,” Friedman boldly proposed that the federal government should temporarily get into the business of venture capital and help finance a new generation of biotech, info-tech, and clean-tech companies.
“When it comes to helping companies, precious public money should focus on start-ups, not bailouts,” wrote Friedman. “You want to spend $20 billion of taxpayer money creating jobs? Fine. 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.”
Friedman suggested a new motto for the stimulus program: “Start-ups, not bailouts: nurture the next Google, don’t nurse the old G.M.’s.”
This is actually not a totally crazy idea. While I largely agree with VC Fred Wilson that the top VC firms do not need and probably would not take government money, I bet more second and third tier firms in need of capital, or young promising firms without a track record, would consider taking on the government as an LP–especially if it came with no strings attached.
We’re not that far away from this right now. Many venture-backed startups have already said they would take and apply for various bailout funds. Wireless provider Clearwire is an obvious beneficiary of the $7 billion in broadband grants, and many clean tech startups are going to tap into the tens of billions in bailout funds dedicated to smart grid and renewable energy.
Even if the plan doesn’t fly, I applaud Friedman for making a creative proposal and focusing the discussion on the need for supporting the new, rather than bailing out the dinosaurs.