Where's the sense of adventure?

Venture capitalists aren't total dolts. Are they?

When you talk to anyone in the venture business, their number one complaint has been the same for the past five years. Too much money is going into too many me-too companies. Usually, the money chases faddish acronyms like CRM (customer relationship management), RFID (radio frequency identification), RNAI (ribonucleic acid interference) -- though it is also powerfully attracted to anything ending in "omics" (genomics, proteomics, glycomics).

That concentration of big bucks makes it hard for any single company to break out as the winner -- there's simply too much noise in the marketplace. So if the top VC complaint is that too much money is being poured into companies that are too similar, venture capitalists would naturally seek to branch out, right? Start investing in something other than software, telecom, and life sciences?

Nope. The lion's share of the money that's invested every quarter goes to those three areas. If you're looking for a totally non-tech, consumer-oriented business in the most recent batch of data, you'll have to look pretty hard. I found two: New England Surfaces, in Lewiston, Maine, which produces countertops, cabinetry, and other interior products; and Ibex Outdoor Clothing, in Woodstock, Vt., which makes sporting apparel out of its own specially woven wool.

Venture capitalists have decided en masse that tech and biotech are the only industries that can spawn high-growth businesses. Perhaps a reminder is in order: Federal Express, Starbucks, Staples, and Filene's Basement were backed by venture capitalists at some point in their evolution. Those were the days before venture capital firms got so narrow-minded, back when it was truly an adventurous business.

In the 1970s and '80s, venture capitalists investments "were very diverse," said Josh Lerner, a Harvard Business School professor who has written widely about venture. In Charles River Ventures' first fund, he noted, "they put money into a pig farm." But later in the 1980s and into the '90s, firms "began focusing on a few very narrow bands of technology," Lerner said. "It's clear that a lot of ways, this is unhealthy."

Even though the cumulative total of venture capital that will be invested in 2004 will undoubtedly be lower than the peaks it reached in the late 1990s, Lerner says that more of the money is being jammed into tiny pockets of technology and biotech, creating what he calls "mini-bubbles." Lerner and some of his colleagues are currently doing research that will compare the financial returns of today with those from the 1970s and '80s, when venture capitalists placed more eclectic bets.

Many VCs will vehemently defend the "need" to be focused and specialized. They can hire partners with experience in biotech, for example, who can not only identify the best start-ups, but also help those start-ups develop relationships with the big pharma companies that will eventually distribute their drugs. Would it make sense for that person to also invest in a chain of burrito joints?

Well, why not?

"When I joined the industry in 1986," said Chris Gabrieli, "there was such a thing as a generalist. But as technology has become more complex, there was a natural predilection toward accumulating specialists and dumping generalists." Gabrieli began his career at Bessemer Venture Partners in Wellesley; now, he is helping to launch a fund called Ironwood Equity, which will invest in some low-tech businesses like consumer products and manufacturing.

"At Bessemer, we backed Bright Horizons child care centers, and HomeTown Buffet," he said. "That kind of stuff makes venture capitalists nervous, because there are no patents on child care or an all-you-can-eat buffet. But 70 percent of the economy is consumer, and nothing being funded by the venture firms has a consumer aspect anymore. They're choosing to confine themselves to the 30 percent of the economy that's industrial."

Visit the website of most New England venture firms, and you'll find that they carve up the world into three or four pretty thin slices. Highland Capital Partners of Lexington tells you that it invests in healthcare, information technology, and communications. Charles River Ventures invests these days only in two categories: communications and software and services. (Don't bother e-mailing them your pig-farming prospectus.)

That dissuades entrepreneurs with non-tech and non-biotech ideas from even knocking on the door. "The universe is a heck of a lot smaller when you're not a tech company," said John Fernsell, president of Ibex, the Vermont clothing start-up that received $1.5 million in venture backing in the most recent quarter. "We had a full product line, but we were small and consumer-oriented, and that combination wasn't wonderful. We were barely hanging on, using suppliers to finance our business. It took us a while to find the right investor."

What could cause venture capital firms to open their minds? Venture firms could start losing money on their me-too investments, and start to broaden their perspective. Or some firms could be successful by investing in start-ups outside the worlds of tech and biotech and set a new example.

The best entrepreneurs, of course, aren't waiting for VCs to wise up. They're financing their ideas any way they can. Tim Panagos, a recent grad of MIT's business school, is planning to use his own savings and some debt financing to start something called Sparqs! Industrial Arts Club. Think of it as a paint-your-own pottery shop, but for gearheads. Members would be able to use the club's high-end lathes, presses, saws, and welding torches to work on their own do-it-yourself projects. They could also get guidance from on-site experts, or sign up for courses.

Panagos hopes to open the first of what he plans to be a chain of the clubs early next year in the Boston area. But he knows that the business won't be appealing to venture capitalists.

"They want to make a killing in five years, by having you go public or get acquired, and I don't think I can get this business there in five years," he said. "But look at Krispy Kreme. They had a hot IPO, but it happened after 60-some years."

Scott Kirsner is a contributing editor at Fast Company. He can be reached at skirsner@verizon.net.