The Entrepreneurial Future
Georges Doriot, who founded the first publicly traded venture capital firm in 1946, arguably announced a new regime of speculative capital when he said: “I want money to do things that have never been done before” (Ante 2008). In the years immediately after World War II, the establishment of venture capital firms was crucial to the ascent of a new kind of commercial enterprise, one that has profoundly influenced the development of digital technologies on a very broad scale. It was with the creation of the first venture capital firms that a financial network to support technology startup companies began to form. The fact that the earliest Silicon Valley startups were funded by venture capital investments is an indicator of the degree to which the developmental trajectory of personal computing has been intertwined with that of finance capital. Fairchild Semiconductor, for example, was the first startup funded by venture capital (in 1957), and it launched numerous “spin-off” companies that were collectively responsible for the innovations that enabled what became the microelectronics industry. Since then, of course, venture capital has grown into a powerful industry that directs vast financial resources into technology startup companies. But venture capital investment doesn’t only fuel the tech startup economy — it actively shapes it. Research on Silicon Valley’s high tech industry suggests that venture capitalists’ importance to processes of innovation has more to do with their role in selecting promising companies than with simply providing financing itself (Ferrary & Granovetter 2009). Beyond choosing the criteria for valuation by which the potential commercial success of startups is measured, they determine which innovations will even have a chance to enter the market. The result is that Silicon Valley innovation is guided directly by finance capital’s future-oriented logic of speculation. Companies with few tangible assets pursue funding without which they will have little chance to successfully launch their products and, as business news coverage attests, some companies are valued at billions of dollars without demonstrating that they have the means to become profitable. What matters is keeping the possibility of a market open. One could think, for example, of Snapchat, a popular photo and video sharing app that has expanded through significant venture capital investments. Last year, the company was valued at $10 billion, despite the fact that it generates almost no revenue, mostly on the basis of its potential to reach users and create an audience. (read more...)