In the Washington Post today, David Ignatius writes a piece titled The Ideas Engine Needs a Tuneup on the mismatch between risk taking technologists and the risk fearing federal government.  The thesis of the article is that the federal government is no longer making risky investments such as the one’s that DARPA used to make in the 1960s and 1970s that led to innovations like the Internet.

From the article:

“His [Jim Heath, professor of chemistry at Cal Tech] work was funded a decade ago by DARPA, but several scientists here doubt the Pentagon agency would back such a blue-sky project today. “If you have a high-risk, high-yield idea, the best place to execute it is offshore,” Heath said…“DARPA seems to be shifting to the NIH model — more near-term, more risk-averse,” said Don Ingber, a professor of pathology at Harvard.”

Aren’t high-risk, high-yield ideas a much better fit for the venture capital community than for the Federal government.  Why should we expect the government to be able to sift through thousands (possibly millions) of proposals to determine where very risky investments should be made.  Investors, including traditional venture capitalists, private equity firms, and venture arms of established companies have shown how this investment should be done.  In Q1 of 2007, there was almost $7 Billion of venture capital invested including $2.88 Billion in healthcare companies.

I really have to question whether there is a significant need for more Federal investment in risky technologies by the Federal government.  First off, there does not a pressing need for capital in this area.  The free market is working effectively, there are clear and measurable profits to be earned from these investments and I cannot see a need for further investment.  Secondly, government agencies and politics are the WORST way to decide where capital should go.  The government appropriations process is geared to minimize the risk of the government getting ripped off, NOT to meet the capital needs of an early-stage technology company.

By ignoring the role that venture capital, the author significantly misses a gigantic piece of the big picture around funding of innovative companies.  I wish Mr. Ignatius had taken a different tack on tuning the ideas engine; perhaps analyzing how government investments should integrate with private investments, perhaps by providing funding for technologies with interesting social implications, but limited commercial attractiveness.