Editor’s note: Vivek Wadhwa is senior research associate at the Labor & Worklife Program at Harvard Law School and executive in residence at Duke University and a serial entrepreneur. This article excerpt is reprinted with permission.

A personal note from Wadhwa: I know this piece is not going to make me very popular with the National Venture Capital Association. But I was a little concerned that I would start getting more angry e-mails … this time from my venture capitalist friends. So I discussed this with several. All agreed that I was only saying what everyone in the industry already knew – that the VC industry is in dire straits and this has nothing to do with the current recession. The model is broken – VC firms have too much money to manage and live off management fees. They simply aren’t investing in small startups or contributing to innovation.

The message – U.S. government and industry should examine ways to provide more direct support to the entrepreneurs who are the real forces behind economic growth. Venture capitalists are just the middlemen and need to face market forces. This is the same thing I wrote about the industrial behemoths —

DURHAM, N.C. – The venture capital industry’s chief lobbying group is arguing that VCs should get government help for their troubled industry. But new research suggests seasoned entrepreneurs don’t need venture money to be successful and that venture backing may even impede innovation.

Let’s start with the lobbyists’ report. On Apr. 29 the National Venture Capital Assn. (NVCA) released a "four-pillar" plan to resuscitate the moribund market for initial public offerings, including less regulation of public companies and new routes to market for private ones. On June 17 the NVCA called for the Obama Administration to exempt the venture capital industry from proposed new regulations.

After reading the press releases, one could be forgiven for coming away with the impression that a failure to help VCs would significantly harm chances of a U.S economic recovery. The group’s April statement and its accompanying slides argue that U.S. job growth won’t revive unless more companies can launch initial public offerings. "The revitalization of the venture-backed IPO market is critical to U.S. economic recovery and to the ongoing viability of America’s competitiveness," the NVCA said.

It would be unwise to give venture capital firms what amounts to a government bailout. There’s significant evidence that venture capitalists, with a few exceptions, don’t add much value to the economy. Any sort of help that involves taxpayers’ funds would be a waste of money.

For the remainder of Vivek’s article,

About the author: Vivek Wadhwa is senior research associate at the Labor & Worklife Program at Harvard Law School and executive in residence at Duke University. He is an entrepreneur who founded two technology companies. His research can be found