BOSTON – LAWFUEL – The Law News Network – Stagnant equity markets will continue to drive capital toward start-ups while the current marketplace has too many dollars and too few quality managers, according to respondents of a national survey conducted by law firm Foley & Lardner LLP.
The survey, measuring the attitudes and perspectives of top executives, advisors, outside consultants and investors in the emerging technology industry, reflects a stagnant, post-bubble IPO market as 75 percent of respondents said they expect M&A to be their exit strategy in the next few years.
“It is interesting that only one respondent cited an IPO as their likely exit strategy,” said Susan Pravda, Co-Chair of the Emerging Technologies Team for Foley. “As we have seen in the work we conduct on behalf of emerging companies daily, an IPO is no longer the preferred end goal for these organizations. This shift is a direct result of costs associated with maintaining public status driven by the impact of corporate governance reforms on public organizations.”
In addition, 60 percent of respondents believe quality of management is the single most important factor in determining the success of an emerging technology business. Overall market dynamics (18 percent), access to funding (10 percent) and quality of the business plan (eight percent) were distant choices.
Respondents also said that it is becoming increasingly difficult to attract and retain qualified directors. A majority (64 percent) cited “management” as the most important factor — over cash compensation (36 percent) and equity incentives (32 percent) — for attracting qualified directors. An overwhelming 83 percent of respondents have been in a situation where the founding management team was replaced, and 75 percent of them said it had a “positive” impact on the organization.
“Management continues to play a key role in determining a company’s success today,” explained Pravda. “Only three percent of respondents said the quality of intellectual property was the most important criteria for starting an emerging technology business, emphasizing the fact that a company can have the most superior technology on the market, but without quality management, its potential will not be realized.”
In addition to the raw data captured, survey respondents shared some interesting perspective when asked to reveal their overall thoughts in an open-ended format.
One respondent, sharing their optimistic opinion, said “Entrepreneurs…have the power to change the world, to make the world a better place.” Another respondent added, “VCs should take more V and act less like a bank.”
The survey coincides with Foley’s 2005 Emerging Technologies Conference to be held in Boston on November 17. A full analysis of the survey and its results can be viewed at www.foley.com/ecsurvey.
About Foley & Lardner
Foley & Lardner LLP provides the full range of corporate legal counsel. Our attorneys understand today’s most complex business areas, including mergers and acquisitions, private equity and venture capital, life sciences, emerging technologies, corporate governance, securities enforcement, litigation, intellectual property, labor and employment, real estate and tax. The firm offers total solutions in the nanotechnology, health care, e-business and information technology, automotive, energy, entertainment and media, food, golf and resort services, insurance, and sports industries.