The tech bubble saw an explosion of VC-funded start-ups—and a dearth of orignal ideas explains Bart Stuck & Michael Weingarten of Signal Lake Partners. They examine 1303 electronic high-tech initial public offerings for a 10-year period ending in 2002 and sorted out those that were VC-funded and compared them with those that were not. They rated them on a scale of 1 to 5, with 1 being the most technically innovative.
Their findings: "Overall, the level of innovation during that decade was surprisingly low. Even more dismaying, it did not correlate well with VC funding: the level of innovation actually dropped sharply after 1996, even as venture funding was going through the roof."
"VCs won't look favorably on funding proposals involving years of research—regardless of the potential payoffs. It's not that they are not interested in innovation. They just won't fund innovation that takes time."
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