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writings
This part of the e-capital guide looks at writing about
funding business innovation in the new economy, particularly
venture capital and angels.
It covers -
introductions
Christopher Golis' Enterprise and Venture Capital:
A Business Builder's & Investor's Handbook (St
Leonards: Allen & Unwin 1998) is a concise introduction
that embraces issues such as fees, business plans, negotiation
strategies, choosing your venture capitalist (assuming
you are not lucky enough to have them choose you), valuations
and exit mechanisms. It is written for Australian conditions,
something that is important given differences between
Australian and overseas innovation funding.
John Nesheim's High Tech Start Up (New York: Free
Press 2000) is comprehensive and readable, although written
for the North American market.
David Evanson's Where To Go When The Bank Says No:
Alternatives For Financing Your Business (New York:
Bloomberg 1998) is a nice introduction - from a US perspective
- of 'alternate' financing such as angels and venture
capital. Going Public: The Theory & Evidence On
How Companies Raise Equity Finance (Oxford: Clarendon
Press 1996) by Tim Jenkinson & Alexander Ljungqvist
is one of the more interesting empirical studies of IPOs.
The Theory of Corporate Finance (Princeton: Princeton
Uni Press 2006) by Jean Tirole is outstanding
The Internet Bubble (New York: HarperCollins 1999)
by Anthony Perkins and Michael Perkins supplied a prescient
analysis of why the bubble
was going to burst.
angel and venture financing
Angel Financing: How To Find & Invest in Private Equity
(New York: Wiley 2000) by Gerald Benjamin & Joel Margulis
is an incisive introduction to angel financing and incubators.
Although again pitched at the N American reader, much
of their analysis is applicable locally. Winning Angels:
The 7 Fundamentals of Early Stage Investing (London:
FT Prentice Hall 2001) by David Amis & Howard
Stevenson and Attracting Capital from Angels (New
York: Wiley 2002) by Brian Hill & Dee Power are less
analytical.
The 2000 MIT Entrepreneurship Center study report on Angel
Investors (PDF)
is significant for its analysis of the role of personal
networks. A UK perspective is provided by Richard Harrison
& Colin Mason's Informal Venture Capital: Evaluating
the Impact of Business Introduction Services (Prentice-Hall
1996). Mason co-authored Informal Venture Capital:
Investors, Investments and Policy Issues in Finland
(The Hague: Kluwer 1998). For Australia see Kevin Hindle
& Robert Wenban's 1999 Australia's Informal Venture
Capitalists: An Exploratory Profile (PDF).
The Venture Capital Cycle (Cambridge: MIT Press
2000) by Paul Gompers and Josh Lerner is outstanding:
just the ticket if you're an academic, have a thing about
econometrics or want detailed figures rather than the
breezy approach evident in Every Business Needs an
Angel (New York: Random 2001) by John May & Cal
Simmons. We particularly liked the depth of its research
and its analytical rigour.
Gompers' brief historical overview is online.
His The Money of Invention: How Venture Capital Creates
New Wealth (Boston: Harvard Business School Press
2001) is also strongly recommended.
A perspective on access to VC is provided by Matthew Zook's
cogent paper (PDF)
Grounded Capital: Venture Capital's Role in the Clustering
of Internet Firms in the US and Creating an Environment:
Developing Venture Capital in India (PDF)
by Rafiq Dossani & Martin Kenney.
An analysis of key criteria and roles employed by Venture
Capitalists in selecting and enhancing early to mezzanine
stage venture capital investment in Australia, a 2001
report (Word)
by Joe Procter and Professor Garry Stockport of the University
of Western Australia is available on the Australian Institute
for Commercialisation site.
Shawn O'Donnell's lucid 2002 An Economic Map of the
Internet (PDF)
considers investment in the 'new economy'.
Angel Investing (London: Jossey-Bass 2000) by Robert
Robinson & Mark Osnabrugge covers VC as well as the
guys with wings and harps. It is particularly valuable
for its analysis of how different sorts of angels view
the world and thus how to deal with them. Locally, Business
Angels: How To Be One, How To Find One, How To Use One
(St Leonards: Allen & Unwin 1999) is an approachable
introduction by Mark Abernethy & David Heidtman. The
2002 Business Angel Investing Groups Growing in North
America study (PDF)
by Marianne Hudson, Susan Preston, Mike Franks et al examines
notions of best practice in Angel networks.
incubation and valuation
Incubators: A Realist's Guide to the World's New Business
Accelerators (New York: Wiley 2001) by Colin Barrow
is an excellent introduction. We preferred it to Inside
Business Incubators & Corporate Ventures (New
York: Wiley 2001) by Sally Richards.
Two starting points in considering valuation are Aswath
Damodaran's
The Dark Side of Valuation (New York: Wiley 2001)
and his 2000 paper The Dark Side of Valuation: Firms
with no Earnings, no History and no Comparables: Can Amazon.com
be valued? (PDF).
memoirs and profiles
Randall Stross' EBoys: The First Inside Account
of Venture Capitalists At Work (New York: Crown 2000)
is a bit better than the title suggests, although as with
his books on IBM and Microsoft Stross is a tad overawed
by the exalted company and inclined to believe what he's
told.
There is a similar treatment in Teresa Esser's breathless
The Venture Café: Secrets, Strategies, and Stories
from America’s High-Tech Entrepreneurs (New York:
Warner 2002), which has a companion site.
We have pointed to profiles of John Doerr and Ann Winblad,
two of the 'Sand Hill Road' mafiosi, in our profile
on builders of the web.
Stross supersedes James Wilson's The New Venturers:
Inside the High-Stakes World of Venture Capital (Reading:
Addison-Wesley 1985).
Ruthann Quindlen's Confessions of a Venture Capitalist:
Inside the High Stakes World of Startup Financing
(New York: Warner 2000) relentlessly looks on the bright
side; Steve Harmon's Zero Gravity: Riding Venture Capital
From High-Tech Start-Up to Breakout IPO (New York:
Bloomberg 2000) is thin. Valley Boy: The Education
of Tom Perkins (New York: Gotham 2007) by Tom Perkinsis,
for us, overly full of accounts of consicuous consumption.
Udayan Gupta's Done Deals: Venture Capitalists Tell
Their Stories (Boston: Harvard Business School Press
2000) is a collection of accounts by VCs from 1946 onwards. There's
an equally adoring but more self-consciously funky view
in Digital Hustlers: Living Large & Falling Hard
in Silicon Alley (New York: Reagan 2001) by Casey
Kait & Stephen Weiss.
The Monk & the Riddle (Boston: Harvard Business
School Press 2000) by Randy Komisar is a dot com Zen
& the Art of Motorcycle Maintenance. If - like
us - you weren't wowed by Pirsig's book we'd advise you
to skip the recipe for sensitive new age Silicon Alley
millionaires with very large egos. Tom Ashbrook's
The Leap: A Memoir of Love & Madness in the Internet
Gold Rush (Boston: Houghton Mifflin 2000) has a bit
more substance. Code Name Ginger: The Story Behind
Segway and Dean Kamen's Quest to Invent a New World
(Sydney: Bantam 2003) by Steve Kemper depicts Doerr and
other investors at work.
A local view is provided by Bill Ferris' Nothing Ventured,
Nothing Gained (St Leonards: Allen & Unwin 2000),
an anecdotal account by one of Australia's leading vc's.
innovation policy and entrepreneurship
We have highlighted studies of innovation policy later
in this guide and in discussing 'Innovation'
and 'Incentives' in the separate
Digital Economy and Intellectual Property guides. They
include seminal works such as Eric von Hippel's The
Sources of Innovation (New York: Oxford Uni Press
1988), Pamela Samuelson & Hal Varian's 2001 paper
The "New Economy" and Information Technology
Policy (PDF),
and Technological Innovation & Economic Performance
(Princeton: Princeton Uni Press 2001) edited by Benn Steil,
David Victor & Richard Nelson and The Governance
of Innovation in Europe: Regional Perspectives on Global
Competitiveness (New York: Pinter 2000) by Philip
Cooke & Franz Todtling. The Emergence of Entrepreneurship
Policy (Cambridge: Cambridge Uni Press 2003) edited
by David Hart offers one point of entry.
banks, the mittelstand and the creatives
There is increasing recognition of cultural and structural
impediments to successful commercialisation, with much
of the most insightful research and policymaking embodying
a holistic approach rather than concentrating on isolated
elements of the 'innovation chain'.
One focus has been on perceived deficiencies in financing
by banks and other lending institutions, with claims since
at least the 1880s that major banks have been unequipped
to support start-ups and small enterprises - the 'mittelstand'
that typically employs most people in market economies
and often has significantly higher growth rates than large
corporations. A classic exposition is Alfred Chandler's
Scale & Scope: The Dynamics of Industrial Capitalism
(Cambridge: Harvard Uni Press 1994).
Another focus has been on the failure of efforts to transplant
US innovation funding mechanisms to the EU and other regions.
Two examples are Ralf Becker & Thomas Hellmann's 2002
The Genesis of Venture Capital - Lessons from the
German Experience (PDF)
and Stefanie Franzke, Stefanie Grohs & Christian Laux's
2003 Initial Public Offerings & Venture Capital
in Germany (PDF).
In Australia concern about the limited breadth and depth
of the venture capital industry has been reflected in
calls to change a taxation system that reinforces a traditional
(albeit to some observers quite rational) risk aversion.
Two starting points for analysis are the 1998 paper Venture
Capital Incentives: A Two Country Comparison (PDF)
by Anders Isaksson & Barbara Cornelius and Innovation,
Technology Policy & Regional Development: Evidence
from China and Australia (Cheltenham: Elgar 2003)
edited by Tim Turpin, Xielin Liu & Sam Garrett Jones.
Questions about 'social capital' were highlighted in fashionable
but much-criticised work by Richard Florida.
Examples are his 2001 study
with Gary Gates on The Importance of Diversity to
High-Technology Growth and his The Rise of the
Creative Class: And How It's Transforming Work, Leisure,
Community & Everyday Life (New York: Basic 2003)
- "why cities without gays and rock bands are losing
the economic development race".
As we have noted elsewhere on this site, that has encouraged
civic boosterism such as the comment by one US civic statesman
that "where gay households abound, geeks follow"
and recipes
that include "take the guy with the tattoos seriously"
and "Hire his boyfriend", tartly questioned
by 'just add bandwidth and stir' sceptics such as the
Manhattan Institute's City Journal.
historical perspectives
Despite the hype, there have been digital-style booms
and busts (and financiers to go with them) in the past.
We've examined the phenomenon in more detail elsewhere
on this site.
Australian Financiers (South Melbourne: Macmillan
1988), edited by Boris Schedvin & Reginald Appleyard,
offers a broader historical perspective with profiles
of the great, the good and the excessively greedy.
Want an overview of how business has been funded over
the past five hundred years? A History of Corporate
Finance (Cambridge: Cambridge Uni Press 1997) by Jonathan
Baskin & Paul Miranti is a crisp history and introduction
to conglomerates, investment banks, the evolution of the
stock market, leveraged buy outs and the impact of such
things as double entry book-keeping.
Charles Geisst's Wall Street: A History
(New York: Oxford Uni Press 1997) provides an upbeat intro
to 'the Street'. We prefer John Steel Gordon's more insightful
The Great Game: The Emergence of Wall Street As A World
Power (New York: Scribners 1999), Howard Wachtel's
Street of Dreams, Boulevard of Broken Hearts: Wall
Street's First Century (London: Pluto Press 2003)
and Financing Innovation in the United States, 1870
to Present (Cambridge: MIT Press 2007) edited by
Naomi Lamoreaux & Kenneth Sokoloff. Their 2005 paper
'The Decline of the Independent Inventor: A Schumpterian
Story?' and 2002 paper
'Intermediaries in the U.S. Market for Technology, 1870-1920'
are also of relevance.
David Kynaston's multi-volume The City of London (London:
Chatto & Windus 1994-2001), examining global finance
and London as a financial centre, is an exemplary production,
rich in detail and analysis without the mogadon effect
of much academic history.
academic
The growth of academic research about innovation funding
reflects the innate interest of particular aspects (particularly
when approached on an interdisciplinary basis), encouragement
from public policymakers and perceived demand from business.
Some of that research has centred on 'entrepreneurship'
schools and history or sociology faculties; much has remained
among graduate business/management schools.
Overseas we recommend the Graduate School of Business
(GSB) at Stanford, the
Center for Entrepreneurial & Small Business Finance
at the European Business School, the Frontiers of Entrepreneurship
Research (FER)
site at Babson College and of course the Baker Library
site
at Harvard Business School. In Australia major centres
are the Australian Graduate School of Entrepreneurship
(AGSE),
Australian Graduate School of Management (AGSM)
and Melbourne Business School (MBS).
journals
Practitioner and observer interest has spawned a range
of specialist journals and commercial newsletters. Examples
of particular significance are
Australian
Venture Capital Journal
Venture Capital: An International Journal of Entrepreneurial
Finance
US Journal of Private Equity
US Venture Capital Journal and sister
European Venture Capital Journal
Asian Venture Capital Journal
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