Venture capitalists maintain a heroic self-image even as other elements of the financial services industry have fallen into a degree of discredit. These guys aren't just shuffling money around — they're providing the financial sinews of innovation! But Diane Mulcahy of Babson College and the Kauffman Foundation says the entire sector is basically a huge scam.

She points out that the VC sector underperforms all the broad public stock indexes. You'd be better off investing your money in a nice S&P 500 index fund than with a sexy venture capital outfit. It's less risky, and the returns are higher.

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