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Money Buzz 1/03

The VC arena for family businesses, Nasdaq's new trading platform and more

Welcome to the Family
Family-owned businesses are said to be the backbone of the American economy. So why is it so hard for them to find venture capital? "There's a bias among the venture community against family-owned businesses," explains Mark Greenough, president of San Mateo, California-based Greenough Consulting Group. "VCs tend to want control over who is on the management team, and that's difficult when there are relationship ties."

Exit strategy conflict is another concern, adds Stephen Sammut, a venture partner at San Francisco-based private merchant bank Burrill & Co. "It's assumed that even if the firm were to go public, it would remain a tightly controlled corporation with the family owning the majority of shares."

Sammut suggests family business owners offer written reassurance of the principals' commitment to their goals and exit strategy. "Concessions may have to be made," Sammut says, "with management agreeing to surrender control or decision-making authority regarding relatives who are employees."



57%
of CFOs whose results were questioned by auditors in the past year refused to change their numbers.
SOURCE: CFO Magazine

Invest With Attitude
Fed up with corporate chicanery, CEO avarice and Wall Street malfeasance? So are Ken and Daria Dolan-and they've written a book about what to do about it. No, it's not a petition to tar and feather Kenneth Lay-although the Dolans do lambast Lay and assorted other CEOs in their sassy, no-nonsense investment primer Don't Mess With My Money. Drawing on their backgrounds as hosts of the popular syndicated personal finance radio show The Dolans, the two former CBS money editors deliver practical advice on virtually every conceivable major investment decision most people will face in a lifetime, from seven money moves to make when having a child to coping financially in the aftermath of a disaster, such as a layoff or the death of a spouse.

Along the way they skewer Wall Street analysts and banks, insurance companies, car dealers and financial advisors, revealing some of the unsavory tactics employed by each profession-and how to avoid being taken in. Savvy and thorough, Don't Mess With My Money is a good investment.

A Winning Platform?
Nasdaq has finally unleashed its new SuperMontage trading platform, featuring new technology that promises to show investors more trade data, enhance capacity for trade volume, and make transactions faster and more efficient. Launched in October 2002, the system's new features are geared toward reducing volatility in the market by consolidating buying and selling information, explains Sang Lee, an analyst at Boston-based Celent Communications--a move that would both boost investor confidence and create a more hospitable investment environment for growing businesses. While it's too early to gauge the market's response to SuperMontage, Lee is optimistic that investors will applaud the improved trend-tracking abilities afforded by being able to see buy and sell orders at multiple price levels. "SuperMontage should provide more market depth pricing transparency, which will encourage investors," says Lee. "In the long run, that will certainly help small businesses and everyone else trying to go public or establish themselves within the overall economy."

It may also prompt the New York Stock Exchange (NYSE) to rethink its model, adds Lee, who points out that outside the United States, most exchanges are electronic communications networks like Nasdaq, rather than traditional trading-floor models like the NYSE. If SuperMontage lives up to its promise, he says, "it could potentially alter the market structure within the U.S. exchange marketplace."


Jennifer Pellet is a New York City-based freelance writer specializing in business and finance.

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This article was originally published in the January 2003 print edition of Entrepreneur with the headline: Money Buzz 1/03.

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