About Venture Capital Trusts

1 Flares Twitter 1 LinkedIn 0 Facebook 0 Google+ 0 Email -- Buffer 0 1 Flares ×

Charles Rothstein

Charles Rothstein, senior managing director and co-founder of Detroit-based Beringea, published an article in Reuters’ PEHub about the need for Washington to engage, just like the United Kingdom, in a new concept referred to as Venture Capital Trusts. Here is my response:

No Charles, you are wrong. Venture Capital (no matter who feeds it) is the improper economic construct to support its underlying asset (innovation).

Multiple facets are highlighted on my website, but the short of it is that you can’t expect to generate outlier returns from a uniform deployment of investment risk (I coined subprime VC). And the last thing government should do is meddle in the business of innovation.

The role of government is to ensure markets operate and obey according to strict free-market principles. And we lack the most fundamental free-market principles that our forefathers instilled upon us.

That is why we fail to detect the groundbreaking innovation that fantastic entrepreneurs in this country can create, and we instead have amassed the messy noise of false negatives that turns Limited Partners and the public off.

The answer to improving the success of innovation is not to deploy the same deflated risk through new distributions, but to deploy the appropriate risk to the outlier entrepreneurs that deserve it.

Find the original article and my response to it online here.


We encourage comments that are relevant to our observations, conclusions and the specific topics discussed in this blog, either in agreement or disagreement. Leaving your insightful comments here will ensure others can learn from them too.  Keep in mind however this is not a place to spew your own theories (go write your own blog), but the best place to question or approve our observations.

About Georges van Hoegaerden

Georges is a serial entrepreneur, venture catalyst, 4x CEO, board director turned innovation economist (by fate). His ideas have raised $14M in venture capital and produced over $100M in returns. More.

  • http://www.grow-connect.com/ Angel Investor

    Thanks a lot for sharing this one to us.