Your article about the decline of venture capital provides some interesting insights into a trend that has been increasingly dangerous and that is now inevitably and inexorably biting the dust.

The problem has been that the success of a brilliant few begins to be imitated and copied to an extent bordering on the ridiculous. The initial "true" venture capitalists combined significant business savvy with guts and practical assistance to the entrepreneur. Their contribution of money-equity was matched with what venture capitalist Don Valentine calls "intelligence-equity." This allows the entrepreneur to earn a significant share in the enterprise with the third ingredient -- "sweat-equity." And, of course, the irreplaceable catalyst called luck.

But the spectacular capital gains of a brilliant (or lucky) few soon spawns hordes of imitators -- imitation entrepreneurs as well as venture capitalists. In a recession-wracked climate, it must be evident that the average 40% capital-growth rate must be pretty elusive and illusory, and by no means typical.

The trouble is that the conventional "business plan" can become not only a lie -- but a long and detailed lie. And, when spiffed up, a high-tech business plan can look glorious to the rookie "vulture capitalist" who, armed with a fresh Ivy-League MBA, has carefully documented and cataloged the ingredients of the next Apple or Tandem. The trouble is that the would-be, imitation entrepreneur has also read the same articles and glory-tales, in the same magazines. Advice abounds on how to raise bigger and better start-up funds, with several do-it-yourself, fill-in-the-blank business-plan formats. And, of course, if the first "vulture" doesn't like your numbers, a quick tweak can produce the desired results in a blink.

The inevitable law of "flim-flam" holds true: You cannot cheat an honest person, and only the greedy get took! With the initial success of venture capital egging on its greed, the pseudo-venture capital population soon becomes an easy target. With nothing to offer but its money and irritating insistence on fast growth, its balloon inevitably bursts.

And, in the meantime, genuine venture capitalists continue to provide genuine assistance to the genuine entrepreneur, and real growth continues to result from an American phenomenon that most other countries are now trying hard to emulate.


Editor's note: When we published "Why Smart Companies Are Saying No to Venture Capital" (August), we anticipated that the article would generate much response from both entrepreneurs and venture capitalists. The response, as reflected in the letters that follow, has shed some additional light on a very important subject. We trust that this is not the end of the discussion about the role of venture capital in building companies, and we encourage other readers to inform us of their experiences.