Policy ForumEconomics

The Problematic Venture Capitalist

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Science  11 Feb 2000:
Vol. 287, Issue 5455, pp. 977-979
DOI: 10.1126/science.287.5455.977

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The federal government has actively financed new firms, particularly in high-technology industries, for several decades. The U.S. Congress is now reconsidering the largest such program, the SBIR program. Although the program has enjoyed some successes to date, efforts to make the program permanent and expand its size are problematic. First, the venture capital industry has dramatically expanded since the program's enactment. Second, like similar efforts, the program has been subject to distortions in awardee selection. These concerns suggest that the program should continue to be temporary, with the burden of proof on those who wish to continue the program.