Buy, Lie, and Sell High: How Investors Lost Out on Enron and the Internet Bubble

Starving Entrepreneurs of Capital

A real danger is that a number of potentially important start-ups are being starved of capital in the aftermath of the bubble. The post-bubble world is in many respects indiscriminating with regard to who gets dragged down. Venture firms are not taking the time and effort to separate the good from the bad. This is unfortunate because good companies and bad suffer alike. CEOs of new firms are spending unreasonable amounts of time trying to raise funds, and valuations are so low that the incentive to be an entrepreneur is limited.

Innovation is the engine of the U.S. economy, and it runs on money. Heavy tech investments have enabled the productivity gains that have helped the economy in recent years. If investors ...