Venture capital

“ It is investment in industry which affords the right to share in corporate control. Capital and Management receive representation on this basis. If Capital and Management are so entitled, why not Labor also? Industry is a joint venture, a venture of Labor as well as of Capital. The difference in the nature of the investment of Capital and Labor only serves to emphasize the fundamental justice of Labor's right to a share in control. The investment of Capital is in the nature of an investment of substances and dollars ; the investment of Labor is an investment in the nature of skill and life. ”

“ What, however, I desire to put to you is, that when you go into a mining venture you go into a speculative venture; but as a proposition with a capital of £2,000,000, dealing with a country almost as big as Europe, which is mineralised, and with that subscribed capital for its development—and as regards its administration, the revenue paying for the expenditure—it is a fair business-like proposition. ”

“ Still, entrepreneurs recombine natural and human resources in novel ways. They do so to respond to forecasts of future needs, or to observations of failures and shortcomings of current products or services.
Entrepreneurs are professional - though usually intuitive - futurologists. This is a valuable service and it is financed by systematic risk takers, such as venture capitalists.
Surely they all deserve compensation for their efforts and the hazards they assume? Exclusive ownership is the most ancient type of such remuneration. ”

“ One is to sell it to a limited company which in return for certain concessions kindly puts up the necessary capital for development; the other way is to find the capital out of one's own private resources, and annex all the resultant profits. ”

“ For instance, although the net profits of a single proprietorship and of a partnership are usually determined in the same manner, there is nevertheless variation in the treatment of some items such as salaries, drawings, interest on capital invested, etc. The partnership form, like the single proprietorship, contemplates an investment on the part of the owners not only of capital but also of time and effort. This is one of the differences in working organization between these forms of business and the corporation. Investment in the corporation is of capital only. ”

“ Under the exigencies of the quest of profits, as conditioned by the larger industry and the more sweeping business organization of the last few decades, the question of capital in business has increasingly become a question of capitalization on the basis of earning-capacity, rather than a question of the magnitude of the industrial plant or the cost of production of the appliances of industry. ”

“ It is too powerful a weapon in the hands of those alive to its possibilities, enabling a small group of men with a relatively insignificant investment of capital to control a country-wide industry. Take the simplest possible illustration: The industry of manufacturing a particular commodity is carried on by a number of corporations scattered throughout the country with an aggregate capitalization of, say, $10,000,000. A, B, and C form a holding company to acquire a bare majority of the stock of each corporation, say $5,100,000 in the aggregate. ”

“ When the modern captain of industry reorganizes and consolidates a given range of industrial business concerns, therefore, and gives them a collective form and name as an up-to-date corporation, the completed operation presents, in syncopated form and within a negligible lapse of time, all that intricate process of cumulative augmentation of business capital through the use of credit which otherwise may come gradually in the course of business competition. ”

“ As is true of good-will and credit extensions generally, so with respect to the good-will and credit strength of these greater business men ; it affords a differential advantage and gives a differential gain. In the traffic of corporation finance this differential gain is thrown immediately into the form of capital and so is added to the nominal capitalized wealth of the community. ”

“ Or to expect that the business should yield fair returns on the capital, Mr. Rowe? Is it unusual when the early period of a new business requires increasing investments with a growing burden of compounding interest, all of which are returned and multiplied when the business becomes established and its turn-over regular?"
"Theory, Miss Foraker. You're trying to apply very fine-sounding phrases to an enterprise which hasn't been proven. A real business does not refuse to sell its products when they're ready for market and when the firm is embarrassed by the demands of its creditors, you know." ”

“ To the extent to which the competitive recourse to credit is of the character here indicated - to the extent to which it is a competitive bidding for funds between competent managers - it may be said that, taken in the aggregate, the funds so added to business capital represent no material capital or "production goods." They are business capital, only. ”

“ Arbitraging transactions, as between different places, time-speculation, transferring labor and capital from one enterprise to another, increasing the supplies of some goods and reducing the supplies of other, changing land from wheat to corn, etc., etc.,—all these things are sources of gain, and they will be done, whatever the origin of the values involved. The new, dynamic enterprise, before it becomes actualized in concrete machinery, factory building, etc., and long before its income is actualized in money-receipts from the goods it is destined to produce, becomes an object of value. ”

“ The capital of any industrial concern under the "money economy" is, of course, also vendible, but with relative difficulty; while the readier vendibility of modern corporate capital is so characteristic and consequential a factor in business and contrasts so broadly with the old-fashioned business methods that it may fairly be spoken of as vendibility par excellence. The "holding company" is the mature development of this traffic in vendible capital in industrial business. ”

“ In its application a distinction must be drawn between those businesses which by means of the possession of some monopoly, patent, or other trade advantage are screened from the full force of competition, and are thus enabled to earn profits above the average, and those businesses where the constant stress of close competition keeps interest and profits down to the lowest point which suffices to induce the continued application of capital and organizing ability. ”

“ Indeed, as near as one may confidently hold an opinion on so dark a question, the certainty of gain, though perhaps not the relative amount of it, seems rather more assured in the large-scale manipulation of vendible capital than in business management with a view to a vendible product. ”

“ The essential features in the adoption of any plan should be that the returns of the private owner should be in proportion to the skill and economy which he exercises in managing his business; that competition and its resulting waste be done away with; and that the industry be placed on such a safe and stable basis that the capital invested in it shall receive the lowest possible rate of interest, thus leaving the greatest possible amount for the payment of wages of labor and permitting sales of the product at a low price. ”

“ The incorporation of a single individual is not legally possible in this country.
The corporation, because of its peculiar advantages over other forms of business organization, has become the accepted form for most large enterprises. The gathering together of large capital funds, the ease and efficiency of management and control, continuous life, the facility of transfer of ownership, and the limited liability of the stockholders, make the corporate form attractive to the investor and absolutely necessary to the large businesses carried on today. ”

“ The word 'invested' in itself imports a restrictive qualification. When speaking of the capital of a business corporation or partnership, such as the act deals with, 'to invest' imports a laying out of money, or money's worth, either by an individual in acquiring an interest in the concern with a view to obtaining income or profit from the conduct of its business, or by the concern itself in acquiring something of permanent use in the business ”

“ On the other hand, if the element of monopoly enters into the business to any noteworthy extent, the prices of the product may be kept so high that fair dividends may be paid even on this high capitalization. That the tendency towards increasing the capital has been very strong there can be no question, and a penalty is apt to be paid for this somewhat reckless financiering. ”

“ Traders and money changers, with an eye for business in a growing marketplace made a more ample living. At the same time the more successful among them accumulated capital which they loaned or invested in stocks of goods, shops, warehouses, caravans, ships. By hiring labor-power they multiplied their own limited physical capacities. By investing in varied enterprises they assured themselves against possible loss in any one of them. ”

“ The Significance of Free Competition.—Now, the tender of capital may be made to any entrepreneur in a particular industry, and the existence of free competition between these entrepreneurs implies that a lender of capital can get from one or another of them the whole value of the product that this capital is able to create. A unit of capital in the steel business can produce n tons of steel in a year, and if one employer will not pay the price of n tons for the loan of it, another will. ”

“ Dangers of the new system of business; promotion of unprofitable enterprises.—The appeal of joint stock companies to the public through the medium of the stock exchange proved to be so effective in gathering capital that a great many worthless undertakings were floated. When times were good, that is, when enterprises had proved successful, when people had saved money for investment and looked with confidence to the future, almost anything in the shape of a158 company could get subscribers to its stock. ”

“ A business which is increasing holds out, on the contrary, a prospect of profitable employment for a larger amount of this floating capital than previously, and those engaged in it become applicants to the money dealers for larger advances, which, from their improving circumstances, they have no difficulty in obtaining. A different distribution of floating capital between two employments has as much effect in restoring their profits to an equilibrium, as if the owners of an equal amount of capital were to abandon the one trade and carry their capital into the other. ”

“ An entrepreneur is a person who is gifted at identifying the unsatisfied needs of a market, at mobilizing and organizing the resources required to satisfy those needs and at defining a long-term strategy of development and marketing. As the enterprise grows, two processes combine to denude the entrepreneur of some of his initial functions. The firm has ever growing needs for capital: financial, human, assets and so on. ”

“ The privilege is open to Stockholders immediately upon investment being made.
What lover of good books can not afford to take at least ten shares? How many friends might, with advantage, take a hundred, or more shares? A million dollars capital would not suffice to manufacture the books our patrons are urgently calling for: we are doing now an immense business for the amount of our capital, which business will be increased as our resources are enlarged.
76 Per Cent. ”

“ In brief, our position is, that whenever, by the efforts of all parties to be advantaged—local landowners, manufacturers, merchants, trunk-line shareholders, &c., the capital for an extension can be raised—whenever it becomes clear to all such, that their indirect profits plus their direct profits will make the investment a paying one ”

“ The interest contract between them is one of mutual advantage, in that the enterpriser pays a definite sum to the investor unable himself to apply his productive agents. Immense sums of capital are now put into the hands of small enterprisers, such as Western farmers improving their lands, builders of city homes and business blocks, and small manufacturers. ”

“ The facilities which these Joint Stock Companies offer for the investment of capital, even of the smallest amount, the temptations which the prospect of large profits hold out, and the low interest obtained on national stock of every description, have attracted a vast body of capitalists, small and great, who have subscribed to these undertakings with the real intention of investment. ”

“ Whereupon he of course leaves the lace business entirely, and uses all his capital in ‘some other industry.’ Having thus established the lace-maker with a complete ‘second capital’ in the other industry, we will next proceed to develope a capital out of the cloth-maker, by recommending all his customers to leave him. Whereupon, he will also invest his capital in ‘some other industry,’ and we have a Third capital, employed in the National benefit. ”

“ The effective industrial capital, from the use of which this output, and therefore these earnings, arise, is the aggregate of capitalized material items actually engaged in industry. The business capital, on the other hand, is made up of this capitalized industrial material taken as a fund of values, plus good-will, plus whatever funds are obtained on credit by using this capitalized industrial material as collateral, plus funds obtained on other, non-industrial, property used as collateral. ”

“ The cotton-seed oil mills of the South, once held by private owners, are now in the hands of a trust whose certificates are quoted on the stock-exchanges, and are held only by men of large capital, or by stock gamblers. This is a typical example of the change which is everywhere occurring. Private enterprise gives way to the stock company, and that in turn gives way to the trust. The salient fact, then, we may express in similar terms to those of our first law of competition, as follows: The congestion of wealth tends to increase inversely with the number of competing units. ”