Tuesday, October 11, 2005

Please No More Business as Usual

We’re encouraged by findings from NorTech on the need for pre-seed and seed investments in NEO start-up companies that have been recently reported by news media. Our takeaway is that our region’s economy can’t be reinvented without a change in how we collectively do business in NEO. We realize that more investment is needed; however, we also regonize why it has been lacking.

Institutional investors are smart people. They know how to invest and where. They have fiduciary responsibility to do so. Yet they’re reluctant to invest in early stage funds that invest NEO start-ups. Why? We look to missing fundamentals for the answers, such as a lack of economic infrastructure and limited managerial talent. Money alone can’t remedy these.

Most early stage companies need talent more than money. These companies are typically started by people who were resisting convention and didn’t want to be part of an organization that demanded standards, protocols, policies and controls. Ironically, once these guys succeed at validating a new concept, their brainchild evolves into an early-stage company that needs exactly what they’ve always resisted: standards, protocols, policies and controls. Their success demands new talent. There’s a limited supply of this, especially in NEO. To get it here, requires a great deal of cash and substantial company equity, more than most entrepreneurs are willing to forfeit. Without the appropriate talent or support services, most start-ups risk squandering early stage investments.

How do we as a region overcome these fundamental challenges? Our client, Glengary LLC, is a great example of an early stage investment fund that’s breaking from business as usual in NEO. It was started with that objective in mind as its Founding Partners were determined to reinvent early-stage investment for the benefit of NEO.

Glengary invests almost exclusively in NEO start-up companies. It does so with a combination of human and financial capital. Glengary has a team of serial entrepreneurs or Operating Partners who have managed businesses from start-up to IPO. Glengary's people help NEO entrepreneurs grow businesses and realize visions, without sacrificing control. When this happens, our region becomes a nest for talented entrepreneurs, and infrastructure and investment naturally follow.

The Founding Partners of the “venture catalyst,” the guys who gave the seed money to start it, are also active. These are NEO business leaders, like Thomas Sullivan, Joseph Gorman and Albert Ratner; all of whom lend expertise and make contacts to introduce Glengary client companies to customers located in markets throughout the globe.

It is this kind of active investment that is necessary for overcoming fundamental challenges to early stage company success in NEO. Compareable solutions can be found elsewhere at GLIDE, JumpStart and ShoreBank. We hope our region’s leaders continue to support these and resist business as usual, which is likely to give us only more of the same and which the citizens of this region are increasingly unwilling to tolerate.


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