Editorial: Battleground shifting to talent

There is no shortage of liquidity in an era of negative real interest rates. Just as the differentiation between public and private-backed corporation has become blurred as they all focus on similar metrics to set strategy and governance, the real challenge remains in identifying and creating organisations able to scale and grow.

Last week, Global Corporate Venturing’s newsletter editorial argued with the rise of large-scale corporate venturing and later-stage investing we were seeing the effective disappearance of meaningful differences between private and public equity-backed corporations and investors.

This fits what noted academic and lawyer Erik Vermeulen describes as “a trend of investors focusing on long-term performance metrics and processes within the venture capital and hedge fund industry….

“As they architect and design their private and public ‘portfolio’ companies, the focus is on certain common themes such as board representation, M&A [merger and acquisition] transactions and business/growth strategy issues.”

More than a decade ago in a lecture, Charlie Munger from Berkshire Hathaway set out a number of ways in which then-standard economics and investment theory had taken businesses away from focusing on their strategies.

But in a world of exponential growth available through the internet and new innovations, these sensible suggestions miss the challenge of scaling organisations to meet the potential demand. Last year’s interesting book, Exponential Organizations, tries to look deeper into this question of how to scale at a minimum 10-times better than their peers in the same space and found that having an ability to have important functions done outside of the core organisation reduces client acquisition or other costs and reduce friction for customers and suppliers.

But where does government fit?

Executives want government’s help to maintain leadership in the innovation economy, according to the latest Silicon Valley Bank innovation economy outlook, on issues, such as immigration and cyber-security, where the role is essentially removing market frictions.

The bigger battle is whether governments can play shaping and making markets, as academic Mariana Mazzucato set out in her book, The Entrepreneurial State, and recent advice to the UK government.

Creating markets can also be about providing the funding to them. As Jonathan Hill at a European Union (EU) conference noted: “If venture capital markets in EU [were] as deep as the US, as much as €90bn more in funds available to companies between 2008 and 2013.”

There is, however, no quantifiable shortage of liquidity in an era of negative real interest rates. Just as the differentiation between public and private-backed corporation has become blurred as they all focus on similar metrics to set strategy and governance, the real challenge remains in identifying and creating organisations able to scale and grow.

And this comes down to the people attracted or developed in a location and their motivations for staying or reinvesting there.

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