Investment community failing start-ups says report – Mature Companies Attract Bulk of Venture Capital

The venture capital industry has been criticized in a joint US/European report that says it is ignoring early-stage start-ups and is instead investing in more mature companies. The report asks governments on both sides of the Atlantic to do more to increase the flow of investment to early-stage firms.

According to the report, produced by a joint working group set up between the US Department of Commerce and the European Commission, this lack of investment in early-stage start-ups represents a "fundamental market failure." The findings call for more public sector and policy maker involvement in the VC process. The working group is made up of representatives of venture capital funds, industry advisers, academics, and specialists.

Full Story: http://www.cbronline.com/article_news.asp?guid=C3BAFB1B-4F42-4337-8B90-72F0278453E6

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Mature Companies Attract Bulk of Venture Capital

U.S. and European officials warn the trend robs new entrepreneurial ideas of needed investment.

By: Daniel Del’Re

U.S. and European trade officials fear that mature companies are soaking up venture capital, leaving little for start-ups that provide a critical resource for growing economies.

Based on meetings with members of the venture capital industry, a working group of officials from the Department of Commerce and the European Commission concluded that early-stage companies and entrepreneurs are not receiving the investment capital needed to launch. The group published a report last week calling for government investment in established venture funds to correct what they perceive as a "fundamental market failure in early stage financing."

The Department of Commerce commissioned a study by analysts at VentureOne, which found that between 1992 and 2004, early stage companies received only $1 million on average versus $3 million to $5 million for later stage ventures. The data is based on 11,600 companies that received venture investments during this time period. Of those, almost half are still in business and have received additional rounds of funding worth $8 million on average.

Full Story: http://www.inc.com/criticalnews/articles/200510/vc.html