The Financial Base of the New Enterprise
Entrepreneurial people provide the initiative, the energy, and the vision to launch a new company. Advanced technology often provides the unique competitive advantage over existing companies or the basis for creating a new market. But money provides "the grease", the wherewithal to make it happen, even for the high-technology firm.
As Rex Morey and his partner were pulling their downward-pointed radar fig along the back country road, they were not expecting to meet any prospective investors for their brand new start-up. But Bernie and Ned Shannon pulled their Shannon Brothers Contractors truck along side and asked if they needed any help. Morey said he was doing fine and, in answer to the Shannons' curiosity, explained that he was attempting to map the subsurface conditions under the roadway, using a high pulse radar derived from earlier research at MIT Lincoln Lab, further developed at EG&G. Quick to sense an opportunity, the Shannons eventually invested the first money in Geophysical Survey Systems, Inc. (GSSI), hoping to score big by being able to improve bidding estimates on excavation jobs through advance knowledge of the mix of gravel and rocks that would be uncovered. They also brought in as a substantial co-investor their friend Jim Grimes, owner of one of the largest gravel pits in New Hampshire. The first meeting of the new Board was held in my office at MIT, as I had been persuaded several months earlier by Morey's enthusiasm to help him as an initial investor and director. The next several years of association provided quite a roller coaster experience, as the company approached bankruptcy on several occasions. Four years after GSSI's founding, the original investors rescued it once more, the new financing occurring at only one-tenth the initial valuation. After years of technological and market frustration, marked by numerous conflicts and eventual resignation of the original founders, GSSI was finally sold in January 1990 to OYO Geospace, a Japanese corporation wanting to expand on GSSI's established and growing position in selling its radar systems for use in resource exploration. The early outside investors were rewarded for their patience with a compound annual rate of return of about 14 percent over nearly two decades.
In recent years numerous books and articles have been published on