Political Venture Capital

If you have any interest in politics, you’ve likely read the front page, above-the-fold article in The New York Times about how just 158 families account for half of all funds collected by presidential candidates thus far.

In case you missed it, here are some of the key findings:

  • The 158 families and the companies they control have donated $176 million in contributions of at least $250,000.

  • Geographically, these families are clustered in New York, Miami, Houston/Dallas, Los Angeles, and San Francisco.

  • By industry, most of their wealth comes from energy and finance, and it comes from entrepreneurs rather than the corporate elite or from inherited wealth.

  • These are the essential findings in the story, which bemoans the size and concentration of cash that mostly finds its way to Republican candidates.

    Not surprisingly, my takeaway from the Times article is very different.

    Risky Business

    First, there are many parallels between raising seed capital for a business or fund and raising money for a political campaign.

    The toughest part is the early money because it’s viewed as more speculative. But the flip side is that it earns the highest return if the venture turns into a success.

    Therefore, I applaud families who are willing to step into the arena and back the candidate of their choice. I noticed in the article that one family had donated $5 million to Governor Rick Perry, who then withdrew from the race. That family took a total loss!

    Furthermore, the finding that a majority of these families are entrepreneurs involved in finance and energy is neither surprising nor troubling to me in the least. In both of those industries, founders need to put up capital in volatile markets where the losers always outweigh the winners.

    Unlike corporate royalty who enjoy high salaries and perks like golden parachutes that cushion downside risk, these wildcatters often roll the dice with no net beneath them.

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    Author: Travis Esquivel

    Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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