I hope that my friends in the west side of the Atlantic will excuse my directness, but somewhere along the way, America seems to have lost the capitalist-entrepreneurial plot.
Once upon a time - well within my living memory - the US stood for the unfettered pursuit of opportunity.
I was vividly reminded of this on my journey from Logan to the Union Club today.
The taxi driver was a Peruvian who, having recently won the Green Card lottery, had abandoned his cab business in Lima and moved with his wife and three (no doubt beautiful) daughters to Boston.
Having arrived, he set about working 16 hour days to earn enough money to feed his family while learning to speak English - the quality of which would shame any Bostonians’ Quechua and even their Spanish! At the same time he started a travel agency and a taxi company, while his daughters set about upgrading their education. Today he is a living example of the characteristic that attracts unqualified admiration the world over – the American Dream.
He was, incidentally, the only person I met on a 10 day trip across the US who was too busy working to discuss the election!
That same drive and vision has spawned the unparalleled scale of my world – information technology. The industry in which I have spent the last 30 years, owes its very being to two fundamental US inventions. Not, incidentally, the microchip and the internet – the national origins of which will for ever be disputed – but Venture Capital and Nasdaq. At a time when most of the world, reeling from (hopefully) the last global conflict tried to drive the risk out of capital, the good burgers of Massachusetts and then California, spotting that risk is the fuse for the geometric generation of wealth, invented venture capital. Few can now remember General Doriot’s American Research & Development Corporation. But back before Bill Gates could spell Assembler they provided the seed capital for DEC and the Route 128 phenomenon was born. While around the same time, Arthur Rock was lighting the touch paper of the economic rocket that is now Silicon Valley.
By the way, if this history interests you, my book - A Brief Introduction To Venture Capital: Examining venture capital’s history, rationale and modus operandi is available on request from Restoration Partners.
As is well documented,the entrepreneurial energy released by venture capital eventually hit the earth’s surface with the creation of Nasdaq – the world’s first electronic exchange. Dismissed at first for its lack of liquidity and quirky governance, Nasdaq challenged the NYSE/AmEx establishment, growing to become the 20th century’s market of choice for VC-backed tech businesses.
But, as my book’s title makes plain – that’s all in the past.
Today, though venture capital continues to deploy billions of dollars of pension fund money in pursuit of the next Google or YouTube, the US public markets have turned their backs on the exciting, energetic and therefore unpredictable, early stage companies that made Nasdaq (and America) great.
Four evil forces are, in combination, stifling the US tech sector. These - the Horsemen of the Apocalypse - are:
- Nasdaq’s relentless move upmarket – as shown by the formation of Global Select;
- The SEC’s absolute conviction that it knows better than any mere investor can ever know and hence the need never to miss an opportunity to increase the power of regulatory enforcement;
- The Plaintiffs’ Bar which has turned the meaning of law abiding into a system that the Mafia would recognise where fear and extortion have replaced justice; and last, but not least
- Sarbanes Oxley which has successfully transformed what was once known as business judgement into something resembling a COBOL program. An inorganic process into which meaningless analyses are inputted and out of which come invoices.
Riding in formation, the Four Horsemen have succeeded in making it hard, if not damn nigh impossible for early stage US companies to take advantage of the public markets in the way we did in the 80s and 90s.
Even though tech entrepreneurs in Europe, India and China are finding unprecedentally benign environments in which to avail themselves of the cash, profile and paper that come from a successful IPO.
So there’s something ironic here. Hard working but otherwise undifferentiated service providers - like cab drivers - that are destined never to achieve meaningful scale, can still prosper in America by labouring 24/7. But scientists, technologists and their entrepreneurial alter egos find themselves fighting a system that seems dedicated to stifling at birth, the next generation of billion dollar corporations.
As the Peruvian cab driver would agree - the world needs it capitalist engine to be firing on all cylinders. But it isn't. Let’s hope it’s only temporary.
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