Harold Bradley tackles the NVCA "4-Pillars" report head on and, unfortunately, provides conclusions that bury the NVCA's message along with its messenger.  

Bradley is right to distinguish between entrepreneurs and the venture industry that serves them, but excoriating the venture industry doesn't help entrepreneurs have more financial options.  Bradley is also correct to raise a red flag at the prospect of more distorting "public/private" partnerships, and he is also accurate in pointing out that the "way things used to be" included a clubby network of public market dealers who pushed Pets.com as heartily as AOL and Intel (when both were $100M market cap stocks).

Yet, these observations do not change the fact that a $500M threshold for public offerings and an anemic marketplace for public shares of companies under a $1B market cap is a needless constraint to our economic system.   Forget the NVCA for a moment.  Even a company as successful as GoDaddy, which is entirely self-funded and has profits nearing triple digit millions, would be hard pressed to offer shares to the public in the current environment.  If Bob Parsons were able to gain liquidity through an IPO at an attractive valuation (not the 6x EBITDA or .25 PEG that a private player would offer but a real valuation reflecting growth and discounted future cash flow), those funds would be recycled back into the investment world to spawn a whole new generation of innovative technologies.   Instead, that significant wealth just sits unproductively on the sidelines, and future entrepreneurs, particularly in capital intensive businesses, sit at home idle and without resources to create jobs.  You may be able to start an affiliate marketing company in your basement, with a PC, but many opportunities take significant risk capital.

There is good evidence that a well-functioning public equity capital market will provide higher valuations (given the lack of liquidity discount) and generally create a win/win situation for the economy.   The real questions are:  what went wrong with the US equity markets?  Why do they remain dysfunctional?  And what will fix them?  That, is a subject for a future post, but suffice it to say that effective markets are much more fragile than investors, companies and regulators realize, and it would be a mistake to assume, as many new age economists seem to, that only traders operate under cognitive fallacies.

As an asset class, venture capital (and private equity) may well have some challenging  and opaque characteristics, but it operates in a private capital market relatively free of artificial constraints, governed by detailed contracts, and populated with sophisticated investors.   And while the rest of equity world is effectively closed for business, VCs are still writing checks, even while their limiteds demand greater transparency and accountability.  The Quadrangle case suggests a certain portion of the funds flow might be corrupted, however, the vast majority of players -- wealthy families, universities, pension plans -- have invested for decades in the market and have enjoyed decent returns.  Perhaps there is a mismatch today between funds available and the natural cycle of innovation, and that will undoubtedly dampen returns, but this situation is correcting itself by the day.