Venture
capitalists, as financiers, focus their investment in high-growth
areas. A few excerpts from Zider’s article
illustrates this
1:
- “Regardless
of the talent or charisma of individual entrepreneurs,
they rarely receive backing from a VC if their businesses
are in low-growth market segments.”
- “Picking
the wrong industry or betting on a technology risk in
an unproven market segment is something VCs avoid.”
- “The reality is that they [VCs] invest in good industries – that
is, industries, that are more competitively forgiving than
the market as a whole”
The following
graph taken from data from Ernst &Young
and VentureSource shows that VC investment is concentrated
in just a few sectors of the American economy.
By statute, ATP funds projects that have large potential for national
economic benefits, so ATP funds projects in virtually every technical
area, not just a few select sectors. ATP has provided a total
amount of $2.2 billion in cost share to private industry for
selected innovative and technically risky projects from 1990-2004.
ATP has grouped its technology areas into five main categories,
and the breakdown is well distributed.
ATP
technology area |
%
of total funds |
Total
ATP funds ($ billion) |
Total
Industry funds ($ billion) |
Electronics and Photonics |
25 |
0.58 |
0.53 |
Information Technology |
22 |
0.50 |
0.47 |
Advanced Materials and Chemistry |
21 |
0.49 |
0.45 |
Biotechnology |
20 |
0.45 |
0.42 |
Manufacturing |
11 |
0.25 |
0.23 |
____________________
B.
Zider, “How
Venture Capital Works” Harvard Business Review,
Nov 1998 (pg 131-137)
Factsheet 1.C10 (March 11, 2005 by Prasad Gupte) |
