VCs May Face Backlash if Profits Come at Expense of Social Responsibility

Opinion

Venture capital is, by nature, an optimistic industry, and venture capitalists have historically gone about their work comfortable that they were making positive societal contributions.

When looking at VC activity over the past half century, one can see venture capital’s role in championing endeavors that advanced knowledge, improved health, increased worker productivity, and preserved natural resources. Some of the most important corporations and technologies developed during that time were the product of optimistic risk-taking by visionary venture capitalists.

But that sunny view of venture capital has been called into question over the past two years. In 2017, the focus was on the individual malfeasance of VC partners and the CEOs at their portfolio companies, some of whom succumbed to the same hubris and abuse of power that felled movie stars and media giants. This year brought a more existential threat to venture capital, as legitimate questions arose about the role of VC-backed companies in political manipulation, worker exploitation, individual privacy violations, technology addiction, and childhood development challenges.

These problems won’t go away in 2019, and there will likely be increased scrutiny of an industry that, despite its noble history of improving society, has too often cavalierly advanced technologies and business methods because they were possible and profitable—without thoughtful analysis of the implications on the community.

Throughout the past two centuries in America, those with political and economic power have threaded the needle of financial gain versus corporate responsibility with mixed success, and the venture capital industry may find itself at a similar crossroads in 2019. We will need to address our issues, or they will be addressed for us.

[Editor’s note: This is part of a series of posts sharing thoughts from industry and technology leaders about 2018 trends and forecasts for 2019.]

Chris Rizik is the Chief Executive Officer and Fund Manager of the Renaissance Venture Capital Fund, a venture capital fund of funds formed by a consortium of several of Michigan’s largest corporations. Follow @ChrisRizik

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