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