After spending more than $40 million over eight years, the creative thinkers who began the government equivalent of a venture capital company were forced to give up their vision. Admitting defeat, Congress cut off all money to the government-run investment firm.

Investment money to 16 companies has been written off as a total loss. An additional 28 companies have failed to produce significant returns, although there's still hope for some. All told, investments totaling $40.3 million have brought just $1.2 million in returns since 1993, according to documents provided to The Associated Press.

Some companies have developed and sold new products. Sugar cane waste has been turned into furniture, sunflower seeds into motor oil, milkweed into comforters. But interviews with several companies indicated that few are turning a profit.

Even worse, federal auditors who looked into why the government-run Alternative Agricultural Research and Commercialization Corp. wasn't more successful found that officials invested in companies with little chance of success and that many recipients misspent the money.

Jeffrey Gain, board chairman for the government investment company, acknowledged that in hindsight the venture made some bad decisions. But he said the experiment also was hindered by lack of vision among lawmakers who refused to provide more money.

``Venture capital is hard to get, and when you say it's for agriculture, they don't walk, they run from you,'' he said. ``If it had been funded properly and we had flexibility, we could have done a better job of monitoring.''

Sen. Tom Harkin, D-Iowa, the program's top congressional supporter, said, ``We were hoping there would be some winners out there.'' But since there weren't, he said, the program ``could never get the critical mass needed, and that was the end of it.''

Only 18 of the 62 companies that received government investment are producing returns now or are expected to do so soon. And most returns are extremely small, officials said.

Two months before the experiment was shut down for new business in January 2000, the Agriculture Department's inspector general released an audit concluding the government investment company did not adequately screen companies, which led to unnecessary losses.

Nine of 11 companies visited by investigators had misused the investment money, several lied about their operations, and others produced new agricultural products that got little use and generated few, if any, new jobs, the auditors found.

``We concluded that AARCC was aware of many of these problems, or should have been aware ... through its monitoring efforts,'' the inspector general reported.

Supporters say the experiment should be evaluated beyond profit and loss. By its nature, the program was designed to take risks unseen in traditional government grant programs.

The amount of tax dollars spent on investments never exceeded $9 million in a single year, a relatively tiny amount in a government budget that spends $20 billion annually on subsidies to farmers.

``Even within USDA, a lot of folks thought it was a bit odd,'' said Dan Glickman, the Clinton administration's agriculture secretary. ``Perhaps my office could have given it more attention. The traditional role is to give grants and let other people do the work.''

Added Janet Potts, Glickman's counsel and a board member of the corporation: ``There is a very low tolerance for that kind of risk-taking in government. It was so outside the norm.''

Those who received money from the program blame government shortsightedness for its failure.

``You killed it by not funding it,'' said Ken Leahy, president of the Leahy-Wolf Co. of Franklin Park, Ill. ``It was a great idea.''

Leahy's company received a $222,000 investment for its canola-oil spray that keeps concrete from sticking to wooden forms in construction.

Other companies succeeded in developing products, but none said they were profitable enough to pay anything substantial back to the corporation. For instance:

--Acadia Board Co., with headquarters in Seminole, Fla., and a plant in New Iberia, La., is processing sugar cane waste for use in flooring, cabinets and furniture. The company received $500,000 from the government.

--Agro Management applied its $600,000 investment to making motor oil made from sunflower plants grown in Ubly, Mich., and Eads, Colo.

--Snyder Seed Co., of Buffalo, N.Y., wants to develop rodent protection for corrugated boxes using capsaicin, the ingredient that makes chili papers hot. The company, which received a $200,000 investment, has been unable to sell its product.

--Natural Fibers Corp. of Ogallala, Neb., which received a $1.8 million federal investment, is filling comforters and pillows with a combination of milkweed plant clusters and down feathers.

Some question whether the government is well-suited for risky investment.

In the private world, venture capital firms that invest in expanding but unproven companies want only to make money. They aren't laden with other responsibilities, like making and enforcing rules.

``In the private sector, there's no such thing as public policy,'' said Jeff Harris, managing director of E.M. Warburg, Pincus & Co. in New York City.

Steve Lazarus, one of seven managing directors of ARCH Venture Partners of Chicago, said private firms usually have an intense relationship with start-up companies they're backing.

``When you make an investment, you're all over them, like parents raising a baby,'' Lazarus said.