Palmer and His Decision to Create a New Venture Capital Fund - Essay Example

Executive Summary Maclean Palmer’s passion for entering into a new business in providing funds to the minority business groups earns true recognition. Palmer’s commitment to the venture, his prior experience in private equity and his intuition helped in tracking a new opportunity. His idea of providing accessibility to the Minority Business Entrepreneurs to venture capital was an entrepreneurial vision. The minority business groups for not having access to a proper capital base suffered from lack of funds. Palmer also showed the essence of a proper teamwork capturing young, bright minds and combining them with experienced brains to achieve business success. Palmer is found to treat the people recruited as general partners who would help him to manage the funds. In case he would have treated his partners as limited, the entire burden of fund management had fallen on him. Thus, he can be taken as an example of a true entrepreneur in promoting a good teamwork. Introduction The case study of Maclean Palmer can be regarded as an ideal model for business entrepreneurship in the Venture Capital market. Maclean Palmer by dearth in the field of private equity investment is found successful in identifying a business opportunity and working out a plan to explore the opportunity cited. His decision to design the 200 million US Dollars on Equity Investment came from his interest to work on the area of minority business development. To this end, Palmer is seen to invite suggestions from Wanda Felton of Credit Suisse First and David Mazza of Grove Street Advisors to gain business expertise. Palmer considers the combination of expertise of the scholar minds with his rich experience of the equity market as a successful option in business entrepreneurship. It is seen that most of the minority business managers recruited were from business schools like Wharton and Harvard. Moreover, with the recommendation of Felton senior business executives were also taken in. Felton in this context observes the marriage of the young and scholar minds with experienced people will certainly pave the way to business success. Palmer is found to give more importance on his people rather than on the experience and qualification parameters. He is observed to give considerable stress to form an environment of spontaneous teamwork. In regards to the opportunity cited by Maclean Palmer, David Mazza of Grove Street Advisors states that the decision to move into non-traditional investment sources was a profitable business decision taken by Maclean Palmer. It is because as Mazza states that the dependence of the traditional institutional investors on the same funding sources for years is not the right decision. It is found that the current business scenario of America is occupied by women entrepreneurs and African Americans eager to make investments. The whites are mainly found to make investments in blue chip companies. Palmer is found to take calculative steps in his entrepreneurial approach by drawing a memorandum on private equity fund to draw a huge pool of investors. They also focused on the right investment strategy and on the collection and management of funds. The paper draws an insight into Maclean Palmer’s entrepreneurial insight by analyzing his business decision and traits of being a successful entrepreneur. Q.1. Evaluate Palmer and his decision to create a new venture capital fund. A.1. Maclean Palmer with his four chosen partners on August 2000 had made a collective decision of opening up an equity fund worth 200 million US Dollars. Palmer by taking a decision to open his own venture capital firm showed his desire to become his own boss. They became ready to leave their jobs, sell off their houses and move over to Boston. Palmer and his partners had a terrible passion and firm commitment behind setting up a new venture. Barringer and Ireland observes, “Passion is particularly important for entrepreneurs because, although rewarding, the process of starting and building a new firm is demanding. Entrepreneurship isn’t for the person who is only partially committed.” (Barringer & Ireland). The identification of the right investment opportunity needs to be made before making any Venture Capital investment. Drafting of a prospectus incorporating the strategy involved with the qualifications and records of the team involved needs be made thereon. The third point centered on the collection of funds which depends on getting the signal from the gatekeeper or advisor. The work of the Venture Capital firm after having raised the money starts with evaluation of business opportunities where the funds drawn can be allocated rightly. The venture capital concept gave rise to two forms of partnership viz. general and limited. The general partners are mainly found in taking responsibilities in arranging the required funds and takes on the legal and corporate responsibility of fund management. The providers of the fund mainly the corporations, foundations and suppliers make the limited partnership. These people are found to play passive roles in the management and investing decisions of the vender management funds. (Bygrave & Timmons 12). Palmer being the principal of Point West Partners in San Francisco had a five years experience regarding investment in the ambit of private equity. To this effect Barringer and Ireland observes, “Several studies show that prior experience in an industry helps entrepreneurs recognize business opportunities”. (Barringer & Ireland 77). Palmer summoned Wanda Felton the director of private equity investments at Credit Suisse First in Boston for seeking her advice to the investment opportunities in the equity sphere. Maclean Palmer in regards to the strategy taken behind starting up the Investment Venture stated that he had always felt interest in the area of minority business development. Palmer here is found to have located an uncharted area for investment of venture capital for the blacks mostly occupy the minority business enterprises in America. They are found to have less access to capital markets and hence suffer the lack of funds. Thus, any move taken to fund this uncharted market is certainly a viable business option. (Bates, Timothy, Bradford & William). Palmer had the desire to help the minority business developers by providing them enough funds to start a new venture. In this respect, he showed an entrepreneurial trait in enhancing the scope of venture capital. He further believed that there was a large talent pool of minority business executives who could help him in gaining the right market. Wanda Felton stated that the decision of Palmer to recruit minority managers from Fortune 1000 companies was an effective decision made. Palmer further contacted David Mazza, a partner of Grove Street Advisors (GSA). Mazza, also strongly advocated Palmer’s decision of non-traditional investment opportunities. He further added that the traditional institutional investors depend on the same sources for years for collection of funds. In the modern age it is found that there are a number of women and African entrepreneurs eager to make investments. (Case Maclean Palmer 345 & Case Maclean Palmer 346). To Palmer the importance of teamwork was a much-needed aspect rather than on the counting of experiences of his collaborates which the Grove Street Advisors (GSA) had given importance on. Palmer in the lookout of developing a strong investment team started conducting mass interviews of potential candidates who would manage the minority fund business. Palmer decided to recruit Clark Pierce, an MBA from Wharton. He stated that Clark was a principal at Ninos Capital and had seven years of financial experience. In regards to another interviewee Andrew Simon, a Harvard pass out Clark stated that he shared excellent potential on business fundamentals. Clark was satisfied with Simon’s way of thinking regarding a problem. It needs to be mentioned in this context that Clark and Simon were quite younger managers drawn to the pool. Wanda Felton made an introduction of Ray Turner, a 61-year-old senior executive in a fortune 50 industrial corporation. Ray was found to have left several offers for Chief Executive Officer positions. To this end, Felton states that the marriage of young and hungry minds with an experienced base would help in the value addition to the company. Dario Cardenas, a 31-year-old Harvard MBA was chosen to be the Vice President of the firm. (Case Maclean Palmer 347). Palmer continued to foster team efforts for the newly recruited individuals and in developing in-depth strategies for venture investments. (Case Maclean Palmer 349). Palmer thus showed the essential signs of being the true entrepreneur like tending to foster his own ideas, identifying the right business opportunity and in recruiting and managing an excellent team. References 1. Barringer, Bruce.R. & R.Duane. Ireland. Entrepreneurship, successfully launching new ventures. New York: Pearson, 2010. 2. Case Maclean Palmer. 3. Bygrave, William D. & Jeffry A. Timmons. Venture capital at the crossroads. United States: Harvard Business Press, 1992. 4. Bates, Timothy, Bradford & D. William. “Venture-capital investment in minority business.”Journal of Money, Credit and Banking. (March 1, 2008). Available at: http://www.allbusiness.com/government/government-support-business-minority-assistance/11410548-1.html (accessed on September 18, 2010). Read More