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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Martin Rasch who wrote (15037)1/13/2000 5:03:00 AM
From: Seeker of Truth  Read Replies (2) of 54805
 
A fascinating post, Martin Rasch. There is indeed a great trend out there; people with new ideas want to work in small companies where new ideas are tolerated and encouraged more than in large companies. As the rate of change caused by technology increases, most large companies look increasingly inflexible and therefore slow moving. Enter the incubator businesses: Softbank,CMGI,ICGE and SFE, of which Softbank is by far the largest. All of them are publicly traded. All of them have received various investments from blue chip companies who want to be involved in the net economy. Now what do these venture capitalists have going for them? I suppose it's
1. Cash.
2. Prestige, which enables them to get more cash from those who see the trend and want to profit from it.
3. Knowhow, in determining early the probabilities of success of their would be next Microsofts.
4. Synergy of the various partially owned entities.
5. Relative autonomy of the partially owned entities. This maintains their entrepreneurial spirit.
None of these look like a proprietary architecture! What's proprietary about a conglomerate structure? Also venture capital has existed for quite some time. The scale is getting much larger than before and there is considerable concentration on the internet these days but basically there's no discontinuous innovation. Backers of nascent companies have always existed; the business is simply much more flourishing now.
Though they don't look like gorillas or even kings, they certainly are interesting investments. I think they will all acquire accounting firms and have business consultant subsidiaries. AFAIK, only Softbank has a part ownership of a bank but I think the others will eventually acquire control over banks also. But all this has been done extensively in pre 1931 Japan where the giant conglomerates were into almost everything. They also invested in small companies, though not quite at the infant stage.
I own shares in three of these four companies but I feel that execution is tremendously important. Some missteps by management could easily decrease their cash, and next their prestige and next the willingness of the knowledgeable institutions to invest with them and certainly their stock price. Gorillas can execute badly, at least for a while.
In any case, I submit that they are not a fit subject for the GG board.
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