Correspondent of the Day: Investors Needed To Sustain Growth

Investors Are Needed To Sustain Growth
Editor, Times-Dispatch: David Cohn's Commentary column, "How Will America's Economy Compete With China's?" stirs the competitive juices, and America must rise to the challenge of China.

Cohn indicates America can compete with our stable Constitution, rule of law, equal opportunity, and creative thinkers. While these strengths are important, he neglects to mention one important American asset currently being diminished: a desire to risk capital.

America is blessed with entrepreneurial individuals willing to risk losing some to gain much. Many of our largest public companies were funded by venture capitalists committed to investing in unproven ideas. This is our true competitive advantage. Unfortunately, we are giving this advantage away. Instead of encouraging investment in America's new and emerging companies, our policymakers are determined to make it harder to obtain funding to build strong, global companies. These potential new job-creating businesses are being sacrificed so no one gets too rich.

What Washington fails to understand is that it takes 10 investments in emerging companies to produce one significant return. Investors willing to take this amount of risk demand a significant reward. If we decide to increase the costs associated with these investments by increasing tax rates, inciting class warfare, and overregulating industry, risk capital will go offshore.

Recently, Kai Fu Lee, a former Google executive, launched a $1.5 billion VC fund based in China. I suspect he learned from America the power of risk capital and how to create jobs, economic growth, and raise standards of living. He should. In 1999, Google was initially funded with $25 million. So now, Lee can fund 60 new Chinese companies with the potential to create six to 10 "Google-size" companies, each with 20,000 employees. Companies we could have in America.

If we don't continue to reward investors in our entrepreneurs, our economic future is certain to be "made in China."

Tom Benedetti.
Richmond.