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Venture Capital

In: Understanding Alternative Investments

Author

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  • Stephen Todd Walker

Abstract

While venture capital appears to have not been affected as adversely as publicly traded stock markets, it is somewhat deceiving because venture capital is private and usually lags the stock market either on the way up or down. A healthy IPO market is essential to US venture capital. IPOs, like commodities, revolve around supply and demand. Bernie Marcus cofounded Home Depot during a recession back in 1978 and took the company public in 1981. The company prospered, growing into one of the largest in the United States. Home Depot created thousands of jobs. Even Google, which was one of the best companies to emerge from the last recession (though public now), had a precipitous drop in stock price. Yet Google’s stock price went back up with the market rather quickly. And how is Google doing? “Google has done quite well without its own social network. Its online search engine accounts for two-thirds of queries made in the U.S., and even more in parts of Europe. Its revenue is expected to surpass $36 billion this year.”1 Google and other technology companies amassed massive amounts of cash. “Google, which has $39 billion in cash, and Apple, which holds $76 billion including long-term investments, don’t pay dividends.”2

Suggested Citation

  • Stephen Todd Walker, 2014. "Venture Capital," Palgrave Macmillan Books, in: Understanding Alternative Investments, chapter 9, pages 159-200, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-37019-8_10
    DOI: 10.1057/9781137370198_10
    as

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