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March 21, 2007

VCs, the Economy, and Employment

The NVCA has an updated study out on the economic impact of venture capital. While there is no doubt that venture capital is an important component of a healthy modern economy, the NVCA study is overly job-obsessed -- which may seem smart politically, but has little to do with the real drivers of the venture industry -- and so I am doubtful about many of the figures in this study.

For example, the study claims that 50% of total employment in media/entertainment/retail comes from venture-backed companies. In other words, according to the study, more people are employed in venture-backed media/entertainment/retail companies than are employed by the entire software industry.

Howzzat? Good question. That is almost entirely an artifact of the study claiming FedEx, Home Depot, Starbucks, and Staples as venture-backed companies. While there is some truth to that claim, it's not particularly helpful given the general uninterest in VCs in the category. All it really does, I think, is drive home how few jobs traditional tech-centric venture-backed companies create -- which is fine, and economically rational.

Frinstance, biotech companies, which are much-coveted by growth cluster afficionados, hire sparingly. That may, of course, explain the absence of total biotech industry employment from all the employment figures in the study.

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