Editor's Letter

Abstract

Comments about the over-all economic picture have often been a part of these editor's notes, and recently I bemoaned how cloudy it all seems these days. But with crystal clear clarity one part of the future coming into sharp focus is the international dynamism of a growing business class throughout much of the developing world. Our issue this quarter will begin and end with more traditional subjects, such as a look at the backgrounds of venture capital teams and two tricky legal issues, but will center on reports from around the world looking at developing economies from two different angles: what is happening inside them and how they will affect capital flows both in and out of their regions. What does the venture capital literature tell us about the importance of technology when selecting new business plans to fund? Of course the management team matters, as do financial issues within the plan and economic conditions outside of the proposed idea. So which of these do VCs use to select new business ideas? De Cleyn, Bosmans and Braet, in our lead article this issue, begin with a literature review over the past twenty-plus years on this central topic of decision criteria for VC investors. They then compare this to a sample of current venture investors to see how technology rates among the various decision criteria. Although the sample size is modest, with twenty firms being interviewed, the results add an interesting twist to the literature. Peter Cornelius asks a provocative question: Will emerging markets be net importers or exporters of private equity capital? At some point, all of us have seen the developing world as needy of and hungry for our precious capital—and our decision systems and control mechanisms as well. But is that the way it will play? He presents data to help you to rethink what is happening outside of the U.S., and it makes quite a big difference to each of us whether we are going to be sending—or receiving—capital from the developing world. South Korea isn't first on many lists of places to invest, but perhaps it should be. As one of Asia's most developed economies, some of the same things that have happened here in the U.S. are now taking place in Asia. Example: remember when the conglomerates of the 1970s were taking themselves apart, and when private equity firms were able to sift through the rubble and purchase “down on their luck” divisions that could be slimmed down, spruced up, and made attractive new public companies? Park and MacArthur bring us up to date on a similar bit of history, going on right now, in South Korea. W. T. Revis takes us through “The China Adventure” noting it is—at once—both threat and opportunity. This is a most appropriate way to begin a look at China, the country whose exported products provide one important reason why our U.S. inflation numbers remain low, and at the same time, why so many entry-level manufacturing jobs at home are no longer available. If China bewilders you, if it seems too big, too complex, and too loaded with hidden meanings and double trouble, this piece is the place to gain a footing on how to approach the giant potential—and risk—that China represents. No one can study China without wanting to compare it with another nearby giant, India. Roberto Ippolito does just that for us, concentrating on the private equity space. China, basing its export economy on manufacturing, differs in many essential ways from India, which has based its economy on information technology and basic metals such as aluminum and steel. What kinds of valuations can be found in the two countries? How to overcome the risks of proper due diligence, unique government regulations, finding qualified managers, or acceptable exit routes? This article will provide initial answers to these essential questions. Our final international article takes us south of the border, so much closer to the U.S. but still entirely differe

TOPIC: Private equity