Josh Lerner


On his book Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed—and What to Do about It

Cover Interview of October 11, 2009


Venture capitalists have suffered from very modest returns in recent years, and funds have found it difficult to achieve liquidity.  So the public efforts to boost entrepreneurship and venture capital are coming out amid an ongoing public discussion about venture capital’s future.

I believe there are two sets of changes that could make a big difference.

The first is an evolutionary one, which is already underway.  There has been simply too many dollars in the venture market, as can be seen, for instance, in the concentration of returns in the top 15 percent of funds.  Too many groups have been able to raise capital from limited partners.  Not only have too many groups had mediocre returns for long periods of time, they have undertaken a lot of “me too” investments, making it hard for everyone to succeed.

We are now seeing that many second- and third-tier groups are having much greater difficulty raising new capital.  This is, of course, a frustrating turn of events from an individual perspective.  But from the point of view of the industry as a whole, it cannot be seen but as a healthy development.

The second change relates to public policy.  In too many areas, our system has made it hard to become an entrepreneur developing advanced technologies.  From our current patent system overrun by sham litigation to the many barriers that public companies face, there are a whole variety of policies that create barriers to entrepreneurship.  We need to revisit many of the “reforms” of recent decades—from the strengthening of patent rights to Sarbanes-Oxley.  We need to really ask how they could be changed to minimize their harmful effects on entrepreneurs.

© 2009 Josh Lerner