The media treats with reverence the geniuses who invested early in tech giants such as Google, Facebook, and other big Internet names. If you're a super wealthy person, and you obtained your wealth by luck, inheritance, or financial manipulation, you're probably eager to prove you have something useful to offer the world. You want to be associated with a sexy new startup to demonstrate your brilliance and establish some family honor. You want to do the modern equivalent of buying yourself a title. Instead of becoming Lord of Devonshire, you can be an early investor in a startup that might become a household name. You want to be like Sean Parker, who will forever be introduced as co-founder of Napster and founding president of Facebook. Internet companies are the new royal titles.

My theory is that venture capital used to be a more rational business model. Today, I think venture capital is largely ego-driven. For wealthy investors, it's more about proving how smart you are, and having the chance to forever associate your name with a startup success. It's sort of like the Kennedy family transitioning from their bootlegging roots (allegedly!) to politics. Rich people often need to scrub their family reputations. Investing in startups is the modern way to do that.

Editor's Note:  The recently issued Kauffman report has stirred much controversy in the venture capital industry at all stages.  I want to hear from our members and readers on your thoughts on the report and do you agree/disagree with the report? - Richard Miller

A compelling new report out today from the Ewing Marion Kauffman Foundation describes how most institutional investors, including larger state pension funds, endowments and foundations, may be shortchanged by their investments in venture capital funds. Over the past decade, public stock markets have outperformed the average venture capital fund and for 15 years, VC funds have failed to return to investors the significant amounts of cash invested, despite high-profile successes, including Google, Groupon and LinkedIn.

View a video in which the Kauffman Foundation's Harold Bradley explains the findings on Bloomberg Television's "Money Moves" The report, "We Have Met the Enemy … And He is Us," is based on a comprehensive analysis of the Kauffman Foundation's more than 20 years of experience investing in nearly 100 VC funds. It illustrates a persistent pattern of inflated early returns in funds that may be used to raise subsequent funds and shows the poor historical performance of funds with more than $500 million in committed capital.