Newspaper article St Louis Post-Dispatch (MO)

Venture Capital Guru's Advice: Maintain the Upper Hand

Newspaper article St Louis Post-Dispatch (MO)

Venture Capital Guru's Advice: Maintain the Upper Hand

Article excerpt

Venture capital - private investment in private companies - is risky for both the investor and the entrepreneur. But the investor must always maintain the upper hand - a very firm upper hand.

That's the bottom line for Arthur Lipper III, a no-nonsense venture capitalist with three decades in the business. Lipper was the keynote speaker at a breakfast meeting last week of the Missouri Venture Forum, a local group of venture capitalists and entrepreneurs.

A multimillionaire, former chairman of Arthur Lipper Corp. and publisher of Venture magazine, Lipper spoke like the former Korean War Marine veteran that he is - giving hard-as-nails advice. Lipper warned about a venture capitalist becoming too close to the entrepreneur. "Be friendly - but not their friend," Lipper said. "Don't take vacations together . . . don't have your kids play together in the back yard." Lipper is the author of "The Guide for Venture Investing Angels," the third edition, which is being printed by Missouri Innovation Center in Columbia, Mo. The center is a non-profit group that helps entrepreneurs and venture capitalists meet each other. Lipper said most of his investments are in the $1 million to $2 million range. Asked about his last 10 business ventures, Lipper said, "My average is not as high as my wife would like. . . . Three out of 10 would be considered successful. And three or four are zombies, which are not quite dead. And the remainders are - if everything goes right - I will get my money back. This is a very tough business." Lipper said a venture capitalist should expect a return on equity in the 25 percent to 30 percent range overall. But because of the high failure rate, Lipper said successful firms should pull down a return of 60 percent to 75 percent to make up for the failures. The capital base must be maintained and expanded at all costs, said Lipper. …

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