World eaters How venture capital is cannibalizing the economy

Community organizer Bracy debuts with a bracing takedown of the venture capital financing model. The pressure VC places on startups to scale "at breakneck pace" drives businesses to make reckless decisions, she contends, describing how investors tanked the once profitable LocalData, which created software to help municipal governments streamline property tax information, by pushing it to expand into offerings for the real estate sector that never caught on. Exploring how other businesses bend the law in pursuit of growth, Bracy details how Shef, which delivers food prepared by amateur cooks to customers' homes, tests the boundaries of regulations requiring salable food be cooked in commercial-grade kitchens. Elsewhere, Bracy excoriates such VC-backed companies as Uber for ushering in a gig economy that classifies would-be employees as contractors to lower costs. Bracy's evenhanded analysis makes clear that for all VC's failings, it has sometimes provided needed funds for such valuable companies as the insulin manufacturer Genentech, and she provides pragmatic suggestions for remedying VC's worst excesses. For instance, she recommends requiring investors to hold their stakes in companies for longer than the standard 10 years, incentivizing them to focus on a business's long-term viability over unsustainable short-term gains. It's a convincing call for change. Agent: Leila Campoli, Stonesong. (Mar.)

Moving fast and breaking things. At some point, the tech sector became Big Tech, much of it fueled by arrogance, elitism, and greed. A civic technologist and community organizer, Bracy sees the villain in this dynamic as venture capital firms that invest in companies that rush for "breakneck" growth and market share rather than build a solid structure--a process known as "blitzscaling." Only a small percentage of startups--and the VC firms that fund them--prosper, but the overall returns can be spectacular. This has led to the VC methodology spreading into business sectors that, says Bracy, are simply not appropriate for them and instead need patient capital to provide a steady growth path. She cites research showing that the VC sector, rather than fostering innovation, destroys more value than it creates. Some entrepreneurs have looked beyond the usual VC providers for funding and have successfully worked with philanthropic foundations and similar organizations. Bracy suggests that corporate regulators should examine the VC sector, which has so far escaped serious attention--while venture capital "might not be as systematically important as investment banking," she writes, "it certainly holds outsized sway in the economy overall." Largely free of jargon, Bracy's study adds up to an important analysis that's supported by some useful ideas. "For innovation to thrive," she writes, "we need venture capitalists to prioritize the pursuit of breakthroughs rather than the pursuit of windfalls." Bracy concludes with some advice for startup entrepreneurs: "Don't give up," she writes. "Don't listen to investors who tell you your ideas aren't big enough or who try to shake your conviction in the solutions you are building….We need your ingenuity and bravery now more than ever." An informative look at an industry that values "hyper maximalist growth at breakneck pace." Copyright (c) Kirkus Reviews, used with permission.