Showing posts with label venture capital. Show all posts
Showing posts with label venture capital. Show all posts

Monday, June 29, 2015

Innovation in San Diego Creates Investment Opportunities

2014 has come and gone, but the benefits of a growth year are likely to carry on for some time in San Diego. According to Connect, a non-profit group that supports innovation, they counted 446 technology and life science start-ups in 2014 up from 426 companies in 2013 (1). Of these firms, Bio-tech got 62% of the $805 million investment capital dollars while software and medical devices got a third and fourth place in total investment influx.

What does this say about San Diego? It says that San Diego has a budding bio-tech and software industry that should be supported by city policies, higher education, corporate training, and international promotion. Encouraging investment funds to find receptive companies seeking those investments for expansions puts money where it has the quickest and most efficient economic contribution.

The Economic contribution comes from using the investment money to expand operations, hire new people, and create additional contractual deals that grow not only the parent business but also smaller suppliers. Money invested into one company makes its way to other firms and the overall tax base of the city.

It is important for decision makers to look at their growing industries and find a connection between what their local competencies and resources offer to determine places to generate higher levels of investment growth. Making sure that the public is aware of these investments through various mediums that reach motivated investment entities helps in speeding up this growth process.

Economic expansion comes with the development of better city policies that further the growth of the area and better capitalizes on its local resources. Biotechnology and technology have significant international interest and is a field that is expected to grow in the future. Local military stakeholders may strengthen this industry, but the global market will determine the innovative value of its outputs. Getting companies and government to focus in the same area can mean higher levels of synergy.

Friday, December 13, 2013

Book Review: Learning from the Masters of Venture Capital and Private Equity

Venture capital and private equity are important components to societal investment. The book The Masters of Private Equity and Venture Capital by Robert Finkel delves into the concepts of what makes investment successful. Contrary to common knowledge the money is only one of the components while the factors of the market and the organization itself are equally important. Few want to invest their money in poorly run and sinking ships. 

One of the biggest steps in venture capital success is learning from mistakes. There will be some companies you make significant money off of and there are some that you won’t be so lucky. The key, like most other things in life, are to continue to learn from mistakes. Whether you’re Edison or the Rockefellers the process is the same. 

Investors often find a method to evaluate companies. They don’t just blindly pick some company and start pouring money into a deep hole. They use methods of analysis to ensure that the companies they are interested in meet certain qualities in the market, management, capitalization, potential, and methodology.  Without a proper evaluation it is easy to fall prey to wishful thinking. 

The authors also offer the need to turn research into commerce and foster innovation. Small firms succeed because they offer something unique. Their best changes for success lay in capitalizing on information and knowledge. Without research, innovation, and knowledge they will not be able to navigate the environment. All organizations should be learning organizations. 

Selecting the right CEO and ensuring you have management metrics helps to encourage proper decision making and accountability. When organizations have the right leadership and a methodology for navigating their environment they are more able to improve upon performance. Management metrics ensure that selected executives are actually doing their job. 

The book recommends a couple of analysis that is helpful:

Portfolio valuation: Looking at various components and choosing proper assets it is possible to understand the risks and potential rewards of investing in particular companies.

Waterfall analysis: A method of understanding preferred stock return with liquidation preferences compared to common stock return.

The authors do not discuss the concept of behavioral aspects of organizations. Strong organizations have strong core sense of purpose and exhibit the proper behaviors to succeed. These behaviors are based in inquisitive, collaborative, learning, testing, and civility behaviors that help ensure that the organization moves upward. Without these behavioral metrics to analyze the overall thinking process it is possible a single simple market success cannot be regenerated.

Finkel , R. (2010). The masters of private equity and venture capital. New York: McGraw Hill