BOOKS
Venture Capital War Stories Reviewed by Janice 0. Baum
The acceleration of technological development over the past 20 years or so has been paralleled by a mushrooming of young companies, many started by scientists and engineers from academia or from large corporations. These entrepreneurs, full of ideas and optimism, usually find themselves in dire need of capital if they are to get their ideas anywhere beyond the talking stage. Venture capitalists stand ready to provide much of that early funding, but only for those companies that can make the cut—those that will provide the biggest return on the venture capitalist's investment should the company succeed. For those unfamiliar with venture capital, " N o t h i n g Ventured," by Robert J. Kunze, provides an informative look into a branch of high finance that is closed except to a very few players. The reader quickly learns that venture capital is a game only for the very wealthy. With minimum investments usually ranging from $500,000 to $5 million, the average investor need not apply. Successful v e n t u r e capitalists amass a fund worth millions of dollars to be invested for their clients. They carefully evaluate every reasonable business proposal to determine how quickly the company's product can be developed, the potential market for the new product, and whether the entrepreneur making the pitch can provide the leadership any new company so desperately needs. Once the commitment to finance a new business is made, venture capitalists secure a healthy chunk of the company for their investors, often around 60%. They serve on the company's board of directors, and are actively involved in company management. There are, of course, no guarantees that a fledgling company will become profitable. The risks, and the potential payoffs, are enormous for all involved, as the author makes abundantly clear.
Insider's look at how venture capitalists provide entrepreneurs with the money needed to start high-tech firms "Nothing Ventured: The Perils and Payoffs of the Great American Venture Capital Game" by Robert J. Kunze, Harper Collins Publishers, 10 East 53rd St., New York, N.Y. 10022, 1990, $19.95
Kunze is a venture capitalist himself, with a number of investments in technology-based companies behind him. He provides insights into the venture capital process as only an insider can. At times the book reads like a "how to" for anyone trying to obtain funding for a new venture. An aspiring e n t r e p r e n e u r would certainly do well to read the book if only to avoid the mistakes and pitfalls that often occur in the effort to secure venture capital, and to take note of the many and perilous problems that can befall even the most promising of young companies. In Kunze's opinion, those who have the creativity and the vision to conceive of a new technology often do not have what it takes to pilot a
startup company. To him, the entrepreneurs "are always brilliant, but seldom sensible. Scientists can be unfocused, irascible, and unrealistic. They don't know what it takes to establish, then operate, a profitable business. They also can be the single reason their company succeeds." More often than not, however, it seems that the founding chief executive officer is asked to step down and take a lesser role after some series of failures or overwhelming problems. The painful process of firing the CEO is a recurring theme in this book. In a series of seven case histories of venture capital financing, Kunze paints varied pictures of successful and not so successful ventures with which he was intimately involved. There are no phenomenal success stories such as Apple Corp. or Genentech here, but the companies whose stories are revealed are real companies started by people whose ideas met with varying degrees of success and acceptance. Kunze tells each company's story from personal experience, complete with anecdotes. Unless one is familiar with these particular companies, he manages to keep the reader in suspense until the last few paragraphs of each narrative as to whether the company's founders actually realize their dreams. The description of the technology involved in each of the new companies' products may not be enough to satisfy a technologically sophisticated audience. Instead, the accounting of each company's success or failure is oriented toward discussions of the personalities involved and the author's interactions with them, the rounds of financing, and strategies for either selling the company or bringing the company public. Each narrative is also rife with details of problems that occur in the process of building a new company. Obstacles such as patent infringements and resulting lawsuits, poor quality control, and awaiting apAugust 5, 1991 C&EN
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Books proval for clinical trials mean delays in bringing a new product to market that can ultimately prove deadly to a startup business. If these stories are typical, it is a wonder that any new company can get off the ground these days. One begins to see why so much capital is needed, and why the only source for it is that provid ed by venture capitalists. In addition to the case studies, Kunze gives an overview and his torical perspective of the venture capital process. His real focus, how ever, is on the 1980s, which were the boom years both for investors and those entrepreneurs looking to start up new businesses. He ends his book with a discussion of venture capital in the 1990s, and how what he sees as the excesses of the previ ous decade will force needed chang es in the system. The author's candid, breezy, and sometimes self-deprecating style makes for entertaining reading. The audience for a book of this type may
be a narrow one, but for those with a desire to know everything there is to k n o w about v e n t u r e capital, "Nothing Ventured" will provide that information. For those in the dubious position of trying to secure venture capital funding, this book is a must. After reading it, those who
discourage easily will reconsider or shelve their plans. Only a true en trepreneur will continue to pursue the dream. Janice O. Baum has several years of ex perience in investment banking, most re cently in institutional research at Robert son, Stephens & Co. in San Francisco. D
Mapping the Human Genome "Mapping the Code: The Human Ge nome Project and the Choices of Modern Science" by Joel Davis, John Wiley & Sons, 605 Third Ave., New York, N.Y. 10158-0012, 1991, 294 pag es, $19.95 Reviewed by Robert L. Sinshelmer
"Mapping the Code" is an ambitious attempt to outline for the general reader the underlying science, ori
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gins, and current status of the hu man genome project. The nonscientific reader should be warned that the material describing the basic science essential to the project is awkwardly written and sim ply inaccurate in numerous places. DNA is not a "complex double-helixshaped protein," for example; nor are 500,000 base pairs "roughly the size of the genome of E.lschenchia] coll" The major portion of the book, continued on page 43
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Books continued from page 24 however, is a well-presented journal istic account of the origins and subse quent controversial development of the project. Some of its early success es (to 1990) are presented as well as the repeated redefinitions of its more immediate goals. The book concludes with a brief survey of the ethical questions asso ciated with the project, touching only lightly upon the major issues currently envisioned. It is perhaps understandable that the author focuses almost entirely on the medically significant aspects of this venture. The medical conse quences for the relief of the tragedy of inborn error are potentially dramatic. However, this approach slights its profound significance for the devel opment of our understanding of hu man biology and human evolution— the quest for the answers to the an cient questions of what are we and how we came to be. Many of the answers are written
deeply inside each of us—in the ge nome resident in every cell. Here lies the residue of our evolutionary past, the clue to our origins. Here lies the organic basis for our biolog ical development and maturation in each generation and our organismic functions. In this sense, the human genome project is an epochal step in the his tory of science, comparable to the elucidation of Maxwell's laws, gen eral relativity, quantum theory in physics; the periodic table in chem istry; or the theory of evolution in biology. The completion of the hu man genome project will be the cul mination of a century and a half of genetics that progresses in a linear sequence from Gregor Mendel. And, like other epochal steps, it will form the basis for a new era in our under standing of human biology. Opinions as to the relative influ ence of innate elements and environ mental factors upon the develop ment of human talent and character
have fluctuated periodically through out history, marching, in the absence of knowledge, to each ideological beat. The human genome project will provide a base upon which we may begin to finally replace long-debated controversies with fact and rational principles. An understanding of human in heritance must inevitably influence how we regard ourselves and how we see our future. It must change the compact between the genera tions. Our generation is privileged to be the one to have this opportuni ty to take this step into a new era of insight. But, of this, there is little in this book. Robert L. Sinsheimer is a molecular bi ologist who studied DNA for 30 years before becoming chancellor of the Uni versity of California, Santa Cruz, in 1977. Since retiring from that position in 1987, he has resumed DNA research at the University of California, Santa Bar bara. Π
INDEX TO ADVERTISERS IN THIS ISSUE *+Amoco Chemical Company . . . 6A-6H BBDS Advertising, Inc.
ft
The Audit Bureau
Advertising Management for the American Chemical Society Publications CENTCOM, LTD.
EMS-Dottikon AG 44 H. R. Abacherli Werbeagentur BSW
President James A. Byrne Executive Vice President Benjamin W. Jones Robert L. Voepel, Wee President Joseph P. Stenza, Production Director
+Texaco Chemical Company Harris Kosmoski & Pinkston
IFC
500 Post Road East P.O. Box 231 Westport, Connecticut 06881 (Area Code 203) 226-7131 Fax No. (203) 454-9939 ADVERTISING SALES MANAGER
Benjamin W. Jones, VP ADVERTISING PRODUCTION MANAGER
+ See ad in Chemcyclopedia. * Companies so marked appear in a Demographic Edition.
DIRECTORIES Chemical Exchange Classified Advertising Equipment Mart Technical Services
42 32-42 42 42
Joseph P. Stenza CLASSIFIED ADVERTISING MANAGER
Geri Anastasia SALES REPRESENTATIVES Philadelphia, PA . . John M. Lucas, Frank Patton, CENT COM, Ltd. GSB Building, Suite 405, 1 Belmont Ave., Bala Cynwyd, Pa. 19004. Telephone 215-667-9666 Fax No. 215-667-9353 New York/New Jersey . . John M. Lucas, Walter H. (Skip) Mongon, John F. Raftery, Centcom, Ltd. Schoolhouse Plaza 720 King Georges Post Road Fords, NJ 08863. Telephone 908-738-8200 Fax No. 908-738-6128 Westport, CT . . .Walter H. (Skip) Mongon, CENTCOM, Ltd. 500 Post Road East, P.O. Box 231, Westport, CT
06881. Telephone 203-226-7131 Fax No. 203-4549939 Cleveland, OH . . .Bruce E. Poorman, CENTCOM, Ltd. 325 Front Street, Suite 2, Berea, OH 44017. Telephone 216-234-1333 Fax No. 216-234-3425 Chicago, IL . . .Graham H. Kreicker, Michael J. Pak, CENTCOM, Ltd. 540 Frontage Rd., Northfield, IL 60093. Telephone 708-441-6383 Fax No. 708-4416382 Houston, TX . . .Graham H. Kreicker, Michael J. Pak, CENTCOM, Ltd. Telephone 708-441-6383 Dallas, TX . . .Graham H. Kreicker, Michael J. Pak, CENT COM, Ltd. Telephone 708-441-6383 San Francisco, CA . . .Paul M. Butts, CENTCOM, Ltd., 2672 Bayshore Frontage Road, Suite 808, Mountain View, CA 94043. Telephone 415-969-4604 Fax No. 415-969-2104 Los Angeles, CA . . .Paul M. Butts, CENTCOM, LTD. Tele phone 415-969-4604 Boston, MA . . .Walter H. (Skip) Mongon, CENTCOM, Ltd. Telephone 203-226-7131 Atlanta, GA . . .Walter H. (Skip) Mongon, CENTCOM, Ltd. Telephone 203-226-7131 Denver, CO . . .Paul M. Butts, CENTCOM, Ltd. Telephone 415-969-4604 United Kingdom
Reading, England . . .Technomedia, Ltd. . . .Wood Cot tage, Shurlock Row, Reading RG10 OQE Berkshire, England Telephone 0734-343302 Telex No. 848800 Fax No. 0734-343848 Lancashire, England . . Technomedia, Ltd... .c/o Meconomics Ltd., 31 Old Street, Ashton Under Lyne, Lancashire, England Telephone 061-308-3025 Continental Europe . . .International Communications Inc., Rue Mallar 1, 4800 Verviers, Belgium. Tele phone: 087-22-53-85 Fax No. 087-23-03-29 Tokyo, Japan . . .Sumio Oka, International Media Repre sentatives Ltd., Room 100, 21 Bldg. 2-2-22, Okusawa, Setagaya-ku, Tokyo 158 Japan. Tele phone: 502-0656 Telex No. 22633 Fax No. 57067349
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