What is venture capital and what is a venture capitalist? And, what does this have to do with the federal government?
Venture capital is the money that a start-up business raises to develop its product offering and bring it to market. A firm seeking venture capital is usually considered too risky to attract equity capital from the public. More likely, the risk would be too high to meet the strict SEC requirements for an offering to the public.
A venture capitalist is generally a wealthy person or a person who can syndicate capital from other wealthy persons to invest in risky start-up businesses. Why do wealthy people want to invest in risky businesses? Because the rewards can be great. Many of the venture capital deals fail but the ones that prosper can yield returns upwards of 100% or more in a few years.
Now let’s face it. Some of these deals could be viable for offerings to the general public but the wealthy venture capitalist want the early large gains for themselves. Yes, they are greedy. But greed is not a four letter word. Greed is what had made the United States a financial success. But, I digress.
The venture capitalist cashes out when the business is ready to go public. The initial public offering (IPO) is how the venture capitalist gets their money back – and usually with a handsome gain. And, the venture capitalist has an incentive in hyping the business to get the biggest possible IPO price. Once the company goes public, its stock is available to the public as an investment and to mutual funds. These investments and mutual funds can form the foundation of retirement plans in the form of IRA’s and 401K’s.
So, what does this have to do with the government? Well, your government under the authority of president Obama has become a venture capitalist. Only thing is, the government is not a wealthy person or syndicate. The government does this with your money. Yes, your government is guaranteeing loans to risky start-up businesses with your money. When Solyndra went bankrupt, President Obama chalked it off to “these things happen in the world of investment.”
Silly me, I didn’t think our government was suppose to engage in the world of risky investments. Well, actually it is not. It is doing so with your money. And, silly me again – don’t I remember the liberals in Congress (Nancy Pelosi you know who I am talking about) becoming adamant about not letting us publicans invest our Social Security funds in the “risky” stock market. The stock market is much safer than firms only able to attract venture capital funding. And, by the way – it is most likely that Nancy Pelosi and her wealthy husband have funds invested in the stock market if not also venture capital.
But we all know what is really going on here; this President is lining the pockets of his friends in high places. These are the venture capitalist who put money into Solyndra and the other high-risk startups and then used borrowing to leverage their investment. Through the use of generous donations to the Obama campaign, they got their high-risk investment guaranteed. This is really all about Obama getting elected and trying to get re-elected. If only we could get rid of these crooks without having to go through the frustrating election process.