Open Book: Important Lessons from a Venture Capital Pioneer
The first rule: "The riskiest part of the spectrum has to date proved the most rewarding, and the greatest capital gains have been earned in companies which were started from scratch." In fact, ARD's first successful investment, High Voltage Engineering, was started by two MIT professors with little or no business experience, whose only product, an incredibly powerful generator used in cancer therapy, had no known market.
Second, in the case of venture investments, "it takes patience for the company's growth curve to develop and, the return to be realized." The stocks of some ARD companies, such as High Voltage and Ionics, took several years before the company's begin to fulfill their potential. "What the stock record shows," said Doriot, "is that many of these affiliates had serious crises early on in their lives when many an investor was tempted to abandon the long-range program." Most venture investing has not been "built on achievement of dramatic overnight successes, but on the steady growth of soundly based, well-managed affiliates." Third, "technology has proved a rewarding field for ARD and is particularly well suited for creative capital investment." The reason? "In specialized technical areas with products protected by patents and know-how, it is easier for small companies to compete with large organizations," explained Doriot. When evaluating an investment opportunity, Doriot relied on certain guideposts to base his decisions. Among the key factors:- Loading Comments...
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