The Waltham, Massachusetts, investment bank is called Broadview, but Paul Deninger's thoughts on the high-tech market are not always broad. In fact, Broadview's chair and CEO has very specific thoughts on how the technology sector can improve, and he should know. Broadview specializes in mergers and acquisitions in the high-tech field, and they also have their own venture capital fund. But not everybody has wanted to hear Deninger's advice. Three years ago, at a European Technology Roundtable conference, he was nearly booed off the stage when he warned Internet entrepreneurs that the bubble could soon burst. It did, of course-but worse is yet to come, according to Deninger.
So if you were king for a day?
Paul Deninger: There are three things I would do, if I could wave my magic wand. First, I would reduce the number of public companies. There are 1,600 to 1,700 public companies in technology. That number has to come down by at least 300 to 500, maybe more, and the way for that to happen is for those companies to merge. There is also dramatic over-funding for technology companies, and [reducing] that would help stabilize the public market. And then one step back in the food chain, a lot of private companies need to either [merge] or go out of business. Thousands of private companies probably should go out of business. Stop venture-funding them. There are way too many companies funded in every category. The third thing I'd do is address the root of the problem, which is too much venture capital, which I'm sure your readers will be shocked to hear.
Undoubtedly. So if there is too much venture capital out there, why do entrepreneurs feel there isn't enough?
Deninger: Because there are too many companies. We've got too much capital out there funding the seventh, eighth, ninth, tenth companies in these markets. And it's those companies that are having trouble raising venture capital; it's the companies that are not going to be winners that feel venture capital is tough to find. I can tell you, really great companies with really great management teams and really great ideas are not having trouble getting funded.
When you talk to high-tech entrepreneurs and suggest going out of business is something to consider, do they agree with you?
Deninger: Yes, they absolutely agree-they think the other guy should do that.