Incentives Are Lacking for Venture Capitalists

Michael Schrage's column "Venture Capital Loses Spirit of Adventure" (Sept. 5) totally mis-characterizes the venture capital industry, its importance to the country and the significance of its role in the 1990s.

True, early stage investment is at its lowest level in years. Many people predicted that this would happen when, in 1986, Congress raised the tax rate on long-term capital gains. Venture capital professionals aren't taking fewer risks--there simply isn't enough capital to invest because we lack incentive for such investment.

Regulatory hurdles are increasing for the small entrepreneur and the venture capitalists who help them. Yes, more investment money is coming from overseas because foreign investors operate in markets that reward long-term investment in emerging companies. If you think venture capital is tight, try getting bank financing for your start-up venture. The venture capital industry is still the only one working on the frontier of technological advancement.

We are working in Washington to reduce capital gains taxes and other regulatory hurdles to encourage long-term investment so that small businesses can once again lead the economic recovery.


Arlington, Va.

The writer is president of the National Venture Capital Assn.

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