It's true that an estimated 4.5 million Americans qualify under this discriminatory formula, but fewer than 10,000 of them have ever made a venture-capital investment. This suggests that the venture-capital community has done a fine job of keeping its money machine secret. The winners in this setup are venture funds limited partnerships that use money from corporations and from traditional institutional investors like insurance companies and pension funds to help entrepreneurs start new companies and take them public. The bigger winners are the venture capitalists who run the venture funds. Forty million is good revenue for a 35-person company, but that's barely the start of this gravy train.
Venture capitalists are among the most powerful and least-known American tycoons.
They represent our new technocracy a synergy of technology, capital, manpower, and the willingness to accept risk. While nearly all VCs except Ann Winblad make some bad investments, it is almost impossible to be a mainline VC and not make sacks of money. Winblad, the queen of profitability, has averaged a 55 percent annualized return on investment, net of expenses, over the past ten years, while common stocks have returned about 19 percent. Venture maintains strict control over the fates of thousands of company founders by being deliberately mysterious about how its business is done. The federal act that protects us from the profits of venture capital is based on the idea that only insiders or the truly rich can know enough or afford enough to play this game.