After all the initial enthusiasm surrounding its birth, a grim cold reality is beginning to grip the Growth Enterprise Market (GEM). Turnover is dwindling. Interest is waning. Perhaps it is only temporary and the new year will see this crawling baby get to its feet again. But perhaps it has been born lame and, if this eventually proves to be the diagnosis, here are some reasons why it may have happened. The difficulty is a misunderstanding of the nature of venture capital. We don't use that word 'venture' without reason and even this is a euphemism for the more appropriate term 'ultra-risk'. It would certainly be more precise. Yet somehow the thinking behind GEM conceives the environment as much more benign than it really is. Somehow we have convinced ourselves that a large number of small but respectable entrepreneurs need only tap a little capital to convert their ideas into booming industries, and that they have mostly been denied this opportunity by the existing narrow-minded and cold-hearted suppliers of capital. You cannot expect us, these entrepreneurs say, to show a profit record on businesses we have not yet been able to start, but bankers don't understand what we are doing and unless you give us a way of reaching people who do understand, we shall be stifled and our economy the loser. Now it is often true that this is exactly the story when such people do make a big success of their ideas and then we hear a great deal about it. What we do not hear a great deal of, however, is the 10 ideas that were given capital but failed miserably for every one that was given capital and succeeded, or the hundreds of ideas that were never worth giving any capital at all, although their proponents said they were. And even this assumes that these entrepreneurs are all honest people who really are happy to reward the providers of their capital rather than rob them of it. Your correspondent is happy that his bankers are cold-hearted. That is what he wants them to be. They are lending his money and he wants them to use their brains, not their hearts, when they do it. He puts money on deposit with them because he thinks they have mostly developed the judgment to use their brains properly. Thus, if they do not like an idea, his starting point is that he does not like it either. Venture capital is not about success stories. It is about failures, constant failures with only the occasional success story to make it seem worthwhile. But it is not true that we shy from venture capital in Hong Kong. Our economy is itself one big venture capital success story and the rocketing share prices of our technology stocks show there is, if anything, a surfeit of public enthusiasm for taking risk. There are plenty of people willing to back risky technology proposals. They mostly take the view, however, that they should be paid a high price for the risks they take. And this brings us to the basic fallacy. The high-tech entrepreneurs think they should be allowed to have their cake and eat it too. They think their ideas are enough and they should not have to pay much more for capital than a proven stable business. Well, it is not true and has never been true. The key to unlocking the treasure trove in venture capital is capital, not ideas. Be as brilliant as you want but save first and start small. That's the rule. If GEM withers it will happen because we falsely bought the notion that it works the other way around and listened to entrepreneurs who thought they should have it all when we would have done better to turn them a deaf ear. The old aphorism still applies. You can fool some of the people all of the time and all of the people some of the time, but you cannot fool all of the people all of the time. The GEM may just prove it true again.