Large companies continue to outsource, and they are finding a better bargain in buying research and development done by other companies. Most have a much stronger currency, appreciated stock, to buy with. But Parsons and others worry about the downside of too much venture capital, even if entrepreneurs consider it an oxymoron. For one, higher premiums get paid up front for the strongest companies. Failure rates of investments rise as weaker ideas get funded.
Returns then drop, making investors less willing to provide more capital.
For example, venture capital funds in 1982 only returned 0.5 percent. Investors would have done much better with a savings account deposit. Overbidding is now common in hot areas like California's Silicon Valley, the experts said, but still hasn't hit Colorado. Gotham Bay Partners moved here from New York about four years ago. It may not make sense to go in with a nose bleed valuation.