As a developer of new technologies for competitive advantage, venture capitalists consulted with me as part of due diligence in determining whether they should invest their limited capital in new start up technology companies. They impressed me with their focus on company and industry fundamentals. They were keen on investing in a venture that would last long term. Then later I became a research analyst for a venture capitalist business. My charter was only to research start ups in my line of expertise. Again, a long term perspective focusing on current and projected fundamentals was the key.
I never encountered a scenario where an investment was considered to purchase a company cheap and quickly sell off assets. Venture capitalists with that perspective are bound to eventually fail. Careful financial and market analytics are critical to growing a venture capitalist business.
My research of Bain Capital suggests that Bain for the most part followed the approach outlined above. Their business model though was more varied. For instance they did invest in companies that were faltering with potential to be turned around. Their successes outnumbered failures. There is no evidence that Bain Capital raided companies just to buy them cheap and shortly sell off assets. The U.S. should have more Bain Capitals that create tens of thousands long term self sustaining jobs.
Above is a short version of my letter that was published in a local newspaper Jan 25.