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RE: Too much power? was RE: 2007 Predictions

• From: "Len Bullard" <cbullard@h...>
• To: "'Rick Marshall'" <rjm@z...>
• Date: Mon, 22 Jan 2007 07:39:34 -0600

There's an impedance mismatch between them and the health of the middle
class, but I'd have to toss in the private equity investors too.   That's a
different topic for a different list or a blog, but as they are a force in
our industry that culls and selects the opportunities for development, their
selection criteria have to be factored into any 'predictions'.  

I suppose one could make a case for the VC as the antagonists of the bigCo
acquisitions from the point of view that companies in the business acquire
another company with an aim to exploit its assets (products, clients, IP,
employees) through sales or to take them out of the market; whereas, a VC
doesn't want to own a business, they want to recoup investments quickly to
concentrate investor wealth.  The Warren Buffet school believes in the moat
of complexity as a barrier to competitors and that often takes the form of a
patent.   The private equity investor is a different animal; they want to
acquire assets by leveraging them, thus a high rate of return on debt
service or a straightforward acquisition of liquid assets such as cash on
hand derived from leveraging assets such as intellectual property lawsuits.
The claim that these PE investors possess special magic juju for managing
technical companies into prosperity is false on the face of it: they only
acquire healthy companies with marginal sales (eg, why is 14% a magic number
for investors over say a comfortable 8%).

Note that none of these are about development of technology and even less
about a services-based business unless they are backed up by some obvious
advantage in a fast growing market that is a distinct disadvantage to a
competitor.  It is about fast wealth accumulation.   Not a good predictor
for the health of the middle class.

len


From: Rick Marshall [mailto:rjm@z...] 

i'm over vc's.

in case noone noticed there's an impedance mismatch between them and 
most of our industry.

• References:
  • Re: Too much power? was RE: 2007 Predictions
    • From: Rick Marshall <rjm@z...>