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!
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