Abstract

Venture Capital as an industry is not a separate asset class, although there are a few superior masters of the craft. It is an illiquid segment of the equity market and its overall returns are closely coupled to the state of the public equity market and, especially, the IPO market. Venture capitalists have concentrated their investing in two sectors – ICT and Biotechnology – where in each case they were leveraging historic upstream investments in science funded by the Federal Government. The case of Biotechnology is interesting because it is the sole sector where VCs have successfully invested in science because public investors have also been prepared to do so: the explanation lies in the unique demand characteristics of the market for biotechnology products. Think of the emergence of a venture capital industry as an epiphenomenon riding on the back of the greatest bull market in the history of capitalism.