Advanced Technology Program Challenges and Opportunities (1999) / Chapter Skim
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Panel IV: Capital Markets and New Technologies
Panel IV: Capital Markets and New Technologies
Pages 86-97
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From page 86... ...
Flamm said that this was the original intent of the program, that is, to foster investment in precompetitive generic technologies in areas in which the ATP's framers believed social returns would exceed private returns. Imperfection in capital markets is the second market failure that the ATP might address.
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From page 87... ...
Flamm anticipated a discussion of the information asymmetries that venture capital addresses, that is, the ability of venture capitalists to better assess and monitor technology investment opportunities than other financial institutions, thereby addressing underinvestment in technology.
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From page 88... ...
Venture capitalists employ different strategies to address this information problem, from sitting on the board of start-up firms to structuring other sophisticated financing packages. These strategies enable venture capitalists to acquire infor mation about opportunities and problems, something that other financial institutions are not well equipped to do.
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From page 89... ...
Public programs may therefore alleviate the tendency of the venture industry to concentrate on a narrow set of technologies. In any event, policy makers should guard against channeling public funds to areas such as Internet companies or human genome sequencing firms that already are well funded by venture capitalists.
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From page 90... ...
Venture capitalists are good at assessing risk when it comes to business execution and business plans. Although some venture capital funds have technology experts on staff, most are more expert on business issues.
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From page 91... ...
Using a sports analogy, Mr. Spener said that the ATP provides a "farm system" for venture capitalists, or a proving ground for technologies, which allows some venture capitalists to call them up to the "big leagues" of venture funding on the basis of good performance in the ATP competition.
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From page 92... ...
Although MIT provided the manufacturing facility to build prototype chips, no one seized the manufacturing opportunity on a commercial basis. Genometrix was incorporated in 1993 to pursue commercial opportunities and, in 1994, received $300,000 in a convertible note from a venture capitalist to begin operations.
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From page 93... ...
For cardiac muscle regeneration and other purposes, Osiris uses stem cells from bone marrow to regenerate other tissues elsewhere. The ATP funding has allowed Osiris to venture into areas where the company otherwise would not go, because of competing demands internally on Osiris's resources.
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From page 94... ...
Finally, the ATP is a useful bridge between outside corporate financing and venture financing, especially because Osiris's stem-cell technology was probably too far from commercialization to interest venture capitalists.
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From page 95... ...
These results hold for the United States and other countries. Clark McFadden of Dewey Ballantine recalled that several speakers said that venture capitalists were good at assessing business risk, whereas the government was good at assessing technical risk.
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From page 96... ...
Dr. Lerner said that there is "so much clutter out there" facing venture capitalists with the shear volume of business plans that come to them.
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From page 97... ...
Mr. Spener responded first by saying that he doubted that many venture capitalists had ever heard of the ATP; therefore, it would be unlikely that a venture capitalist would ask whether a firm had applied for, or been denied, an ATP grant.
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