I just read a short article in the 22 January 2007 issue of Businessweek magazine (yes, my reading list is getting long) and it reminded me of a conversation I had with the CEO of ITANS last Thursday night. We were chatting about the difficulties start-ups have in raising capital and the disconnect there is when venture capital gets involved.
As Mike noted, the owner has typically invested years in the creation of her company and the company is often like a family member, or cherished prize. The owner wishes to keep control and wants the ability to continue to direct and chart the company’s path well into the future.
This contrasts with what many in venture capital want – which is a defined strategy to maximize value over a relatively short time frame – often 5 years. Venture capital often does not want the original owner to remain as the primary strategic visionary – more often that not the reality is the original owner is not all that good a business person.
So venture capital wants the original owner to remain but in a secondary capacity as chief technology officer of some such position. Imagine the frustration and disappointment when the original owner has to play second fiddle to an outsider.
The article on Businessweek talked about corporate churn – the rate at which high level executives leave companies. The statistics are interesting. The churn rate increased by 68% from 2005 to 2006. That is to say, 68% more senior executives left their companies in 2006 than they did in 2005.
This can be explained in a number of ways but at the end of the day it often means a significant percentage of people have left their companies at least slightly disillusioned or worse.
One way we can help to alleviate this is to provide more information to the business owners who run growing companies. Now I know that we are all labouring under the deluge of information coming at us via the internet and other media and I have no easy answer other than to say we should work to provide more short straight forward seminars to business owners to give them the tools to manage their company’s growth.
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