Efficient Capital Allocation

I had the opportunity to talk with a couple of venture capitalists on a recent trip to the UK (part of "Silicon Valley comes to Cambridge"). I found the numbers interesting: a typical VC will look at several hundred prospects each year, seriously consider perhaps 10%, and fund 2-3. The lifetime of an average company is 6 years before the VC will exit, which means a relatively small steady state portfolio.

I wonder about the welfare effects of this approach to capital allocation. Essentially a single decision maker investigates an investment in the setting of a VC, and the variance of return on any given investment is quite high. I'm curious whether an economy that increasingly employs venture capital to fund innovation is essentially choosing a huge increase in variance on its return on investment.

Verizon Wireless

Exciting news this week: appearing to preempt the license rules that are likely to be enforced on the C block auctioned in January, Verizon Wireless announced an open application and open device policy on their network beginning next year.

Details are here.

Google's Open Handset Alliance

Since I was away at the INFORMS Annual Meeting, I wasn't on top of Google's press release Monday about the Open Handset Alliance, their new initiative to encourage creation of "open" wireless devices. They have on board an impressive list of 34 companies ranging from service providers to device manufacturers. See here for details.

Facebook and marketing

This New York Times article has some interesting info about Facebook plans for "hooks" for advertisers.

OpenSocial

Another Google related post: together with a host of other companies, Google announced an "alliance" for an API to counteract Facebook's platform. See this article for details.

gPhone

Lots of chatter now about Google developing a platform for wireless devices. See, for example this Wall Street Journal article.