Page 1 |
Previous | 1 of 3 | Next |
|
This page
All
Subset
|
Sources of Capital; Pros, cons, and comparisons / V\6k by DAVID M. FREDERICKS/Parfne/; Financial Services Center; New York The second most important objective of a high-tech entrepreneur is to raise capital. Perhaps he needs funds to develop a disk drive idea into a marketable concept. Perhaps he is looking for R<S»D money to build a prototype medical device. Or, maybe he makes environmental testing equipment and needs to finance a move into overseas markets. Seed capital. Start-up money. Funds to fuel expansion. Whatever the need or product, all these people share one thing in common: they need capital to underwrite their dreams. How much money is being raised to finance high-tech businesses? No one really knows the answer. But the total pool of capital raised from just one source—venture capital funds-reached $7.5 billion last year, which is nearly triple the total invested in these funds as of 1977. According to Stanley E. Pratt, publisher and editor of Venture Capital Journal—a magazine that has been tracking the venture capital industry for more than two decades—the pool grew by about $1.6 billion in 1982, well above the $1.3 billion increase in 1981 and miles ahead of the paltry $39 million raised five years before. And remember, this is but one source. Add in the capital raised through initial offerings of public stock, bank loans, private placements, Small Business Investment Companies, and the like, and the total pool could well add up to tens of billions of dollars. Venture Capital Despite the glamour attached to the name, venture capital is probably as old as commerce itself. Earlier in our own century, the great venture capitalists were the families that controlled private fortunes—the Rockefellers, Whitneys, and Astors—people who were able to take big risks on tosses of the economic dice. In our own day, venture capital is very much a creature of the tax laws. When the capital gains tax was raised from 25 percent to 49 percent in 1969, much venture capital simply evaporated. A decade later, the capital gains tax was rolled back to 28 percent, and interest revived. The annual amount of venture capital invested nearly doubled in a year—from $550 million in 1978 to about $1 billion in 1979. The tax rate reduction in 1981, from 28 percent to 20 percent, further spurred growth. Another factor in venture capital's growth is the Small Business Investment Act of 1980. This act makes it considerably easier for venture capital firms to raise public financing, since they can sell up to $5 million in securities without having to meet SEC
Object Description
Title |
Sources of capital: Pros, cons, and comparisons |
Author |
Fredericks, David M. |
Subject |
High technology industries -- Finance |
Office/Department |
Touche Ross. New York Office |
Citation |
Tempo, Vol. 28, no. 2 (1983), p. 29-31 |
Date-Issued | 1983 |
Source | Originally published by: Touche Ross, & Co. |
Rights | Copyright and permission to republish held by: Deloitte |
Type | Text |
Format | PDF page image with corrected OCR scanned at 400 dpi |
Collection | Deloitte Digital Collection |
Digital Publisher | University of Mississippi Library. Accounting Collection |
Date-Digitally Created | 2010 |
Language | eng |
Identifier | Tempo_1983_Spring-p29-31 |