Sowing the Seed Capital of Future Growth

June 14, 2010

‘It is like the seed put in the soil – the more one sows, the greater the harvest.’
– Orison Swett Marden.

Damage control: nowadays, there is much talk of the painful task of minimizing the damage done by the crisis – reducing job losses, cutting public spending to rein in spiraling debt, trying to prop up failing companies and so on. In general, staunching the ‘economic blood’ flowing from out of this ghastly wound. It’s an unrewarding task and a bitter pill to swallow, but at the end of the day has to be done.
I believe we should also be looking to tackle this problem from a proactive, bullish, in the end rewarding, point of view. Let’s try to start putting back into the economy what it’s lost. Encourage companies to start up or grow, create jobs and wealth. One fundamental way of doing this is to foster investments using seed money and venture capital. It goes without saying that the public sector can also play an important role in this area through loans and infrastructures, like incubators, business parks, and start-up schemes. However, most companies need to turn to the private sector to be able to get off the ground and realize their full potential. Having arrived at that crossroads, one of the roads leads to traditional bank debt, but the conditions on offer are not as appealing as they were in the pre-Lehman era and there is still a strong sense of a credit crunch, whatever the banks may say. So that road, or should I say turnpike, isn’t getting much traffic and if it is there are too many tolls to pay.
A path which companies should be encouraged to go down is the seed money/venture capital one. This is an excellent way for start-up or growing companies to get that much needed injection of capital to carry out their business plan. Of course, VC and seed funds are always going to keep a close eye on the balance sheet, but if they’ve bet on someone it’s for a good reason. They believe that somebody’s going to succeed in their aim, achieve their goal. They’re in the business of backing winning horses, otherwise they wouldn’t be around. Once a company achieves a certain size, critical mass, it can rely on its own assets and then decide if it prefers to get its money from more traditional sources. But, it’s in those crucial, early, embryonic stages that companies need someone to back them and that’s where seed money is of the utmost importance. Even the public administration has a vital part to play here, because it can and should encourage this process by giving tax breaks and other facilities to seed/VC companies. This is one of the roads to creating jobs and wealth.

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