Start Up the Risk-Takers

Let's move away from H1-B visas and rampant internationalism, and back to the subject at hand: the cluelessness of Mr. Friedman. A recent column (Start Up the Risk-Takers) talks about how the government is pouring billions into 'losers' like GM (and AIG and Citi?) whereas it should be helping to 'nurture the next Google'.

Well, the government has spent many billions on research, and continues to. Many start-ups are still funded by research grants, including the SBIR program. But the real problem today isn't with the government, but with the private sector. The IPO market has been broken for at least a decade. This leaves start-ups (and their investors) with no way to cash out. This lack of reward has been devestating to the technology business as we know it.

Why is the IPO market broken? There are many theories on this, but my best guess is that it was easier for Wall Street to sell Credit Default Swaps than to help place the offerings for small companies. Maybe we'll return to the Good Old Days where bankers were in the business of actually investing in companies, rather than simply moving money from one account to another. It's so quaint and old fashioned. But it might be just what this country needs.