His statistics that the stimulus is creating jobs at the level of $200k is off. The emphasis for stimulus jobs is on shovel ready jobs. After the cost of materials and equipment is factored in it comes to anywhere from 75% to less than half for the paycheck.

It's an uphill battle for them to get more federal money for ventures, especially in this climate of the public asking what are we getting for all this deficit spending and the public being concerned about the cost of healthcare reform. Venture investing cannot claim to be as good for the economy as stimulus jobs. Stimulus jobs have a focus on public infrastructure and public buildings. Long after the stimulus jobs are gone, the community still has its new schools, new roads, and so on. Immediately after a venture job is lost, the community usually has nothing to show for it.

Frank, that was a great job you did on bringing up Capcos. Since he talked about getting federal money that made the point very relevant.

Jaffe mentioned federal research that leads to business. John Doerr of KPCB has a different take on federal spending that helps venture investment. I haven't heard him advocate for federal money to make investments. He believes it should be in the form of more research and complains that the budget for DARPA has been cut too much. He says the internet came from DARPA and mentions many other inventions that have made their way into the economy.

Asking for federal money is another way of saying you are doing something wrong. Wall Street and the automobile industry have received federal money and there is a lot of talk about reform, regulations, pay limits, profitability, and paying the federal money back. So in this time of difficulty for fund managers to raise money due in part because their limited partners are not satisfied with the returns, rather than promoting an emphasis on better returns, they look to create a limited partner of the federal government with an emphasis on jobs so that the returns are not questioned.

If they are successful in getting federal money it won't be long before someone will say that the money should go to those firms that are producing better results. Then the NASVF will be right back where they started, needing to focus on profitability just like everyone else.

In seeking this federal money they are just putting off the inevitable. Venture investing as a whole needs a better reputation. The number of active funds and the number of new deals per year continues to decline, going on ten years now.

SBICs already have access to federal loans and grants. Now NASVF wants the money without having to pay it back.

NASVF should recognize the damage they are doing to their reputation by asking for federal money. You can't tell limited partners to invest in your fund so they can make a lot of money and then also say, oh and by the way, we need federal assistance. NASVF needs to ask itself if seeking the federal money is worth the loss in reputation.

The handwriting is on the wall. Those firms who seek and rely on federal money are branding themselves as not being able to perform adequately for their limited partners. They are always going to be the smaller funds.

His idea of a giant $2 billion dollar (or larger) angel fund is a good idea. Essentially one would aggregate the angel groups and available funds from around the country. Deal flow would still be invested locally by local angels. However, by spreading the risk amongst all investments nationwide steady returns of 23% could be achieved by all, not to mention the superior job creation that innovation creates. What are your thoughts Mr. Peters?

Frank: reminds me of the incentives that Germany offers. A fund would stimulate small business and create jobs.