Worst venture capital fund, ever?

Posted by Marc Hodak on November 21, 2009 under Collectivist instinct, Politics | Be the First to Comment

I was at a CFO conference on Thursday where the keynote speaker was CFO of the Department of Energy, Steve Isakowitz.  You’d think a CFO, even one in government, would talk about things like accountability or controls for spending, especially with $36 billion in stimulus funds dropped into his department’s lap.  Instead, this CFO ran a cheerleading session about all the investments the government was making on “green” initiatives and energy independence, which he acknowledged had a history of failure, but not one word about accountability.

At the end of his talk, I got up and asked him:  “What controls will you have to monitor the returns on these investments?  And how will you keep from crowding out private investment in similar energy projects?”

His answer:  “The private sector is not making these investments.  In fact, one of our screens for making any particular investment is that the private sector is not financing such projects.”

When I sat down, a couple of the CFOs sitting at my table shrugged and said that it appeared that he didn’t want to answer the question about accountability for returns, or that he chose to answer it with with a highly questionable assertion about lack of private sector involvement.

I felt that his answer was clear.  He basically said that the government has created a huge venture capital funds–rivaling Kleiner Perkins, Sequoia, NEA, etc.–and that this fund will only make investments that no private investor would touch.

What upset me wasn’t that he failed to answer my question, because I think he did after a fashion, but that his answer was intended to satisfy a finance audience.  And what really upset me is that it appeared, aside from a few of us cranks, that it worked.