Venture capital is at the heart of what makes America great. Venture capitalists provide the money to grow new ideas into new businesses and into new industries. That helps raise productivity and transforms our economy.

Venture capitalists have been around for centuries, although they have only more recently been formally called venture capitalists. Before, they were simply investors willing to risk their capital and time to start new companies and new industries. The formalized venture capital industry began to grow into a real industry in the 1980s and then exploded in the 1990s with the Internet boom.

When the Internet bubble melted down, so did many venture capitalists. All that is well-known.

However, some new research by venture capital fund manager Flag Capital sheds new light on how deep that meltdown was. Instead of just looking at the number of venture capital firms that went out of business, they looked at the number of venture firms that have become inactive. Many venture firms didn't go out of business, but instead stopped making significant new investments.

Their research indicates the number of active firms fell from 441 in 2000 to 119 in 2005 and to 88 in 2012. That's almost an 80 percent decrease in the number of firms that are at the heart of developing new technologies and new industries.

I have been active in the venture capital industry for many years and have even raised venture capital. So, I have many friends and contacts in the industry and have seen its decline first hand. I have seen the funds that didn't close, but were no longer very active.

But these numbers surprised me. I was unaware of how widespread the damage had been. I was also surprised by the lack of any significant rebound. Although there has been a slight rebound since 2010, there has been no general rebound over the past decade despite there being a number of new technology industries that have started to develop during that time.

I always talk about how important it is to raise productivity to increase long-term productivity and this is certainly one part of raising productivity. There is certainly more to raising productivity than just technology, but it is important.

These numbers are another indication of how we spent too much time over the past decade focusing on reflating bubbles or creating new ones and not enough time focusing on improving the underlying drivers of productivity growth and the real, long-term economic growth that follows.

About the Author: Robert Wiedemer
Robert Wiedemer is a managing director of Absolute Investment Management, an investment-advisory firm for individuals with more than $300 million under management. He is a regular contributor to the Financial Intelligence Report, the flagship investment newsletter of Newsmax Media. Click Here to read more of his articles. Discover more about his latest book, "Aftershock," by Clicking Here Now.