Management Buy-outs and Venture Capital

Management Buy-outs and Venture Capital

Into the Next Millennium

Edited by Mike Wright and Ken Robbie

This book presents up-to-date evidence on the issues facing financiers and intermediaries involved in venture capital and management buy-outs. It provides a comprehensive review of existing literature and an analysis of international trends in market development as well as a global comparison of the major issues.

Chapter 2: Venture capital: predictions and outcomes. Venture Capital at the Crossroads and Realizing Investment Value revisited

William D. Bygrave and Jeffry Timmons

Subjects: economics and finance, industrial organisation


Page 38 2.  Venture capital: predictions and outcomes. Venture Capital at the Crossroads and Realizing  Investment Value revisited William D. Bygrave and Jeffry Timmons Introduction In keeping with the theme ‘Venture Capital and Management Buy­outs into the Next Millennium’, we will examine the predictions and prescriptions for the professional  venture capital industry that we made earlier in the 1990s. Those predictions were published in two books, Venture Capital at the Crossroads (Bygrave and  Timmons, 1992) and Realizing Investment Value (Bygrave, Hay and Peeters, 1994). The first book was the culmination of ten years of research into the US venture  capital industry. The second book resulted from a 1992 conference, ‘Realizing Enterprise Value: IPOs, Trade Sales, Buybacks, MBOs and Harvests’ that was  organized by the European Foundation for Entrepreneurship Research (EFER). In this chapter, we will examine what we predicted and prescribed for the US venture  capital industry, and what we were brash enough to recommend for Europe. Venture Capital at the Crossroads When we embarked at the start of the 1980s upon our concerted research into the US venture capital, the industry was shrouded in secrecy and replete with folklore.  For example, two of the most widely held beliefs were that the annual return rate on venture capital was 40 per cent or higher, and that by far the most important  influence on the flows of venture capital was a favorable capital gains tax. Venture Economics has data on the US venture capital industry that goes back to the...

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