Venture capitalists poured less money into U.S. startups in the third quarter and split this among more companies, signaling that investors are trying to be more economical with their funds.
Venture capitalists have long been a source for the “seed money” essential for starting new companies. Doesn’t sound like they’re planting many seeds nowadays.
Perhaps it’s because they don’t like how the federal government is fertilizing the soil—i.e., America’s economy?
According to Ed Morrissey at HotAir.com, (who tipped me to the AP article mentioned above), this year’s long-term economic forecast is bleaker than last year’s. Wasn’t this supposed to be a “Recovery Summer” for our economy? Apparently the business world didn’t get the memo:
The future outlook from the third quarter last year looked more promising than it does now. Last year, investors expected a normal recovery, albeit perhaps somewhat slower than previous recoveries. Investment went up in Q3 and Q4 last year in preparation for an expansion that has never arrived… Thanks to a massive amount of uncertainty introduced by regulation passed by Democrats this year in both ObamaCare and the Wall Street regulation bill — as well as the Democrats’ decision to postpone their tax-rate decisions — investors are getting a lot more cautious about their money, especially on the venture side, where the risk/reward ratios are much less clear than in the last recovery in 2003.
Billions of dollars in federal debt were incurred to spur the economy through stimulus spending. Not only is the economy not doing well now….people like venture capitalists, who get rich by investing now in hopes of reaping big paydays in the future….aren’t investing! Apparently they don’t see many paydays in the future.
I suspect that lots of these venture capitalists were big supporters of Democrats in the 2008 election. Democrats did very well with that segment of American society that is very well-off. Wall Street and Silicon Valley both supported Democrats handily at the polls two years ago. Culturally, many of America’s business leaders—who tend to cluster in places like New York City, Chicago, Washington D.C. and Los Angeles—fit much better with Democrats than Republicans.
So…I doubt these venture capitalists, and other businessmen, are holding off on investing because Karl Rove told them to.
No, I think it’s because these people became rich because they’re smart with money in the first place. And, right now, they don’t see much payoff in investing in the American economy.