The Positive Sum Strategy Harnessing Technology for Economic Growth (1986) / Chapter Skim
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Trends in Financing Innovation
Trends in Financing Innovation
Pages 473-478
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From page 473... ...
In 1983, venture capitalists, company managements, institutional investors, and investment bankers contributed to a frenzied IPO market environment. Fear and greed have always ruled the stock market, and collectively we were inordinately greedy in 1983.
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From page 474... ...
However, even in generally unreceptive markets, there will be public market access for quality companies with proprietary technology, differentiated products, or dominant market share. In late 1984, for example, I was involved in taking public two companies Wyse Technology and AST Research whose valuations were one-half to one-third what they would have been if Hey had gone public approximately 15 months earlier.
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From page 475... ...
This results not just from the greater selectivity of the public market but, I believe, also from changing appetites for risk, as well as from the excellent values that some mature private companies offer today. On addition, several factors—a skeptical, value-conscious public market; limited access to private capital from institutional investors; limited participation by substantial corporations in the less attractive deals, and We fact that many companies were premised on Starve business concepts that could not, as Jane Moms, editor of the Venture Capital Journal, put it, "achieve marketing differentiation or, in some cases, timely product delivery"—all contributed to Me 1984 result Mat "most venture capital firms, especially Hose win established portfolios, concentrated more of their efforts in 1984 on working win existing portfolio companies rather than new investments" (Venture Capital Journal, February 19851.
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From page 476... ...
I experienced this firsthand recently when a designer, manufacturer, and seller of turnkey office automation products decided that it could expand its market significantly by making available to larger potential customers its software component only, rather than software bundled into a computer of its own design. The company's c~general-partner in its R&D limited partnership, which had provided $2 million in funds for the development of this product, insisted that the company not offer stand-alone software because the partnership receives a percentage of gross revenues, which obviously are much higher for a they product that incorporates a computer.
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From page 477... ...
Lesser companies must resort to warrants, indices, and the like, but for quality high technology companies we essentially want to do straight equity financing when a company makes its initial public offering, and we are striving for an after-market price Hat climbs consistently over time and in concert with the company's results, which we hope are also improving consistently. Basically, we want to be able to return to the public markets repeatedly, largely since the quality high technology company typically requires considerable capital as it grows.
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From page 478... ...
(The 17 IPOs of over $5 million by industnal companies had appreciated an average of 18.3 percent by m~d-March 1985.) It is not a frenzied market; indeed, it is a skeptical market, but it is highly receptive to high-quality high technology companies.
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