development project, it must find a way to record the equivalent of a $50 million loss on its financial reports. When a venture capital firm takes a loss, it is a private matter not reported on any public income statement. On the other hand, if the investment succeeds in creating a viable business, a public company can acquire that business and place it on their balance sheet at effectively no cost. Even in the current downturn, he said, his firm is approached by companies that want to bring the products of young firms to the marketplace, either through acquisition or through partnership.

Another consequence of the growth of the venture capital industry is that it is much more competitive. This business “used to be a bunch of middle-aged technology executives investing in deals with their friends,” said Mr. Domenik. “It has become much larger, more institutional, multinational, multiracial, broad based.” The competition is driving firms to invest in earlier-stage, higher-risk activities. Some of the projects Mr. Domenik’s firm is pursuing involve university professors in their laboratories supported by government grants. “Every one of these are early enough and risky enough,” he said, “that it keeps me awake at night.”

With the growth of the venture industry, individual firms have specialized. Some invest at very early stages, like Sevin Rosen; others invest at later stages of development. Mr. Domenik’s firm, after 20 years, always invests during the early stages, specializing in technology and practicing a hands-on approach.

An example of the companies Sevin Rosen has invested in is Capstone Turbine. Eight years ago this company was the risky but promising idea of a group of former rocket engineers who wanted to develop a new microturbine technology for distributed power generation and other uses. This technology, which had received early-stage support from several government initiatives, showed great promise but was far from commercial readiness. After more than $200 million of development work, the technology had proven to be reliable, versatile, and popular, and the once risky investment has paid off in a successful IPO and rapid subsequent growth.¹

Mr. Domenik closed by saying he would like to see a solid-state lighting initiative succeed. It has excellent technical content, he said, as well as huge