Don’t let lack of investment become a self-fulfilling prophecy

There’s a worrying lack of confidence in the markets that I believe is all our own doing. I think we’re talking ourselves into this doom and gloom.

The jitteriness is evident when you count the number of IPOs for the first quarter of 2011: only four companies floated in the first three months of the year. That’s down from 23 in Q4 2010, and a drop from 13 this time last year.  AIM has been disappointingly lacklustre: there were just two floats on Q1, down from 19 in the fourth quarter of last year. The funds raised were also pretty low, with AIM managing just £61m, compared with £460m last quarter.

What’s going on? Where’s all the confidence gone? For example, I speak to a guy who’s worth several hundred million. He’s just exited a deal and pocketed £50m, and has to dispose of £20m but doesn’t know what to do with it. He does nothing, no-one invests, and this lack of investment becomes a self-fulfilling prophecy.

That’s why it was a huge relief to hear that someone, somewhere, is taking their investments seriously. I applauded when I heard about Pond Ventures’ latest exit – its fourth in six months!

The owner of the company that’s just achieved a successful exit – Nanotech Semiconductor –is quoted as saying that Pond knows how to add value to a portfolio company’s management organisation because it has the “operational background and strategic insights to significantly enhance an early-stage venture’s day-to-day performance and the quality of its exit outcome”.

Hear, hear.

Unlike other VCs, who stick a managing director on the board of one of their portfolio investment and expect it to perform – and then wonder why it doesn’t reach its milestones – Pond manages its companies closely and efficiently. It supports each of its investments with commercially focused manager who provide the skills and insight to build the business.

Pond’s performance proves that although building early-stage businesses may take a little longer than initially thought, with the right investors and commercial support, risk of failure can be mitigated.

VCs: sit up and take note.

 

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