Venture Capital's Red Flags

Tech nology and global finance have radically reshaped employment, social progress, investment, and national fortunes. With a robust and committed policy of openness, America has been a prime beneficiary of these developments. Free markets ensured that the right people could be mobilized in the right places with the right investments. Global capital seeks the best opportunities wherever it can find them, and, fortunately for the United States, that investment often comes to American shores.

The intersection of free markets and global capital is venture capital (VC), the investment dollars behind startup companies. Compared with more liquid public markets, VC has traditionally been under-regulated. After all, why should the government stop someone willing to risk money for potential gain when it can unleash technological progress, innovation, and job growth? That’s starting to change, though, because investing in a startup is no longer just about funding the next wave of innovation. Venture capital today can involve much more—including intentions not aligned with a company’s purposes, as well as goals at odds with the national interest. The openness that has, until recently, been a clear strength in the VC sector is now increasingly a point of vulnerability. Read Full Article »