At 08:56 PM 12/8/2001 +1100, [EMAIL PROTECTED] wrote: >At 4:01 PM -0800 12/7/01, Greg Broiles wrote: >>>When a new company is out raising venture capital you have very little >>>information on the investors. > >Greg, I agree that e-gold (GSR .. whatever) is not to blame, BUT, teh >above is just not correct. > >You suffer due dilligence up the ass re: investors.
I think you have misattributed the above (re "very little information") - Vince Callaway wrote that, and I quoted it in order to disagree with it. The venture capital model I'm familiar with looks like the following - A group of managers (let's call them "Muttonhead Venture Partners") talks to investors and raises a pool of capital, which is held by an entity (perhaps a partnership, or a corporation, or an LLC/LLP).. in this case, let's call it "Muttonhead Technology Venture Fund I" formed for investment purposes. The managers raise a certain amount of money and invest it according to some parameters they've described in advance to the investors. They get an ownership share in the investment company, and charge management fees which the investment company pays, in exchange for handling the investments and business of the investment company. They may form several of those investment companies ("Muttonhead Technology Venture Fund II", "Muttonhead Biotech Venture Fund", etc.) depending on how busy they are and how much capital is available. The managers then review business plans and meet with managers/owners of existing or proposed businesses (let's imagine a hypothetical "Nifty Internet Thing"), to find what they consider good candidates for investment. If they find a company which seems to be a good match for a fund's purpose, and are able to reach mutually agreeable terms for an investment, the investment company purchases shares (or makes a loan which is convertible to equity) in the new business venture. Now, if Vince Calloway is saying that the entrepreneurs in charge of Nifty Internet Thing aren't going to be able to learn or care much about the big boring companies or orthopedic surgeons or whoever else put up the capital which went into "Muttonhead Technology Venture Fund I" which then gets invested in their company, then, yeah, I agree with him. But if he's saying that the entrepreneurs can't or don't need to bother learning about the histories, reputations, other investments, conflicts of interest, business/personal contacts, and so forth, about the partners who make up Muttonhead Venture Partners (who are likely to end up with control of one or more Nifty Internet Thing's board seats, as well as a fair amount of control over Nifty Internet Thing's ability to raise capital in the future), or the other investments that Muttonhead Venture Partners have made, and how they've fared afterwards, well, then I still disagree. It's not very hard at all to find out what investments a reputable VC has made (at least not the ones that turned out well :), who the partners are, what's on their resumes, what other boards they sit on, and what their expertise is (and is not). Read Red Herring - look at their website - run their name through Google and see what conferences they spoke at, and what they talked about. And, yeah, absolutely, the guys at Muttonhead Venture Partners are going to be all over the guys who run Nifty Internet Thing, their books, their IP, and all of the rest, to make sure that they're not giving a few million dollars to a bunch of idiots or crooks who are going to waste or steal the money. And the guys at Nifty Internet Thing ought to return the favor, because the VC's are in business to make money for themselves, not for entrepreneurs - that's just a side effect. -- Greg Broiles -- [EMAIL PROTECTED] -- PGP 0x26E4488c or 0x94245961 Eliminate due process, civil rights? It's the Constitution, stupid! --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED] http://www.e-gold.com/stats.html lets you observe the e-gold system's activity now!