In last issue of EFS (V3#10), my Venture Capital article reflected current experiences of three small Silicon Valley companies. My article generated comments from four Venture Capitalists. In essence, there are Venture Capitalists and there are Vulture Capitalists.

Venture Capitalists fund one company in every 2,500 companies that query them. Their preferred exit strategy is private sale of company. They are willing to hold their equity in an investment for years. They believe that they bring management and financial skills to company that will enhance company's probability of success. If two-of-seven investments (29%) succeed, they make money.

Vulture Capitalists fund one company in every 100 companies that query them. Their preferred exit strategy is to take company public. They intend to recover their risk capital quickly. They bring sales skills to company. Their goal is to make money on every investment.

I've come across Vulture Capitalists offering toxic convertibles. They act as Merchant Bankers offering bridge financing. They offer secondary Private Placement financing to high flying, usually Hi-Tech public companies.

In 67 years, SEC hasn't found a way to protect investors from their own stupidity. I'm not sure that you can outlaw stupidity. I'm certain that it can't be done by 20,000 Government lawyers.

The SEC has created illusion that American stocks are credible investments. This benefits American brokerage community. The core of stock fraud problem are some of these brokerage firms. Like J. Edgar Hoover's refusal to investigate Mob, SEC doesn't seriously investigate major brokerage firms, NASD, or Depository Trust Company (DTC). If SEC charged Michael Miliken, why weren't owners of Drexel charged? Why is Federal Reserve charged with investigating DTC? The Feds own sixty percent of DTC. It's like asking fox to investigate murder in hen house. The Law and SEC policies usually protect crooks on Wall Street.