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Ten Reasons Why

 Tech Stocks Do Not Represent The Absolute True Value Of Technologies

or

Why Investment Frenzies Have Nothing To Do With Technology Value

 

By Roy D. Follendore III

Copyright (c) 2001 RDFollendoreIII

 

The current depression in the stock market is mostly an artifact of the way that venture capital operates without self regulation.  Too many people trying to get on the top of bandwagon and make short term profits is a formula to generate failures.  The market becomes like a rainforest that creates its own weather conditions.  People who do not understand the following simple facts really should not be investing in technology stocks. The problem with tech stocks is more about the way that investments are being realized rather than the technologies itself.  Overnight hit and run investors first inflated and then burst the tech stock bubble.  Here is how it happened.     

 

1.  The financial people who invest in stocks are not the folks who create  technology.

What appears to be gold may not be. The investor is too often not qualified to determine if technology is valid, will work or is useful to industry and business.  Not only does the investor generally lack any  technical background, when technical qualifications do exist, the investors are too easily biased. The errors that occur can result in a false positive or false negative decision to make an investment.  That does not stop some from taking credit.  When things go wrong for the investor they walk away, when things go right they take the credit.  Furthermore, because of the way that they manage their portfolio, investors can appear to be successful when they are not.  

2. Investor Exit Strategies have nothing to do with long term technical opportunities.

The business of investing is not the business of the entrepreneur.  The investor has short term demands that the technology does not.  The entrepreneur can have his guts on the line.  The risk to the entrepreneur is in establishing a relationship with a wrong investor.  This results can be a misfit of agendas and the a ultimate loss off affection between the goals of the entrepreneurs and the financial advisors. 

3. Investors are directly interested in profits, not products or services.

The disaffection between the investors and the entrepreneurs extends deeply to true objectives and definitions of profit and success.  The only way for a technological company to earn profits is to sell products and/or services.  But for the serious entrepreneur, selling stock is seen as a source of new obligation, not new profits.  For the entrepreneur to take on and be responsible for more than what can be handled means inviting disaster.  The Investor sometimes tends to look at this as missed opportunities while the entrepreneur looks at this as being prudent. 

4. Stock can be bought or sold but there is no going back to the "good old day" without technology.

Technology is the functional basis of the financial culture.  It never stops moving forward and if it fails then so does the concept of the modern financial institution.  Therefore technology can not be allowed by society to fail.  Investors conveniently seem to forget this fact in Bear markets. 

5. Good technologies are not invested in; good investments are invested in.

There can be a difference between a good investment opportunity and a good technological opportunity.  Investors demand the identification of existing markets that will not exist with the best technical solutions. A good technology can be just a one shot affair.  A good investment involves a goo technology that can be invested in multiples of times as it becomes more successful.  This is a far broader definition that changes the nature of what the investor must look for in a good technological investment.      

6. Truly revolutionary technology requires revolutionary language to effectively communicate.

Revolutionary new business requires revolutionary technical solutions. This in turn means that the ease of communicating the best technology is inversely proportional to how new and unique it is.  But new and unique does not necessarily mean risky nor does it mean risk free.  It is the fear of the unknown that investors seem to fear the most.  Investors therefore must learn to learn rather than fear to invest because they do not know.  100% of successful investments that are passed over are future losses.    

7. Technology does not care about financial timetables.

Technology eventually works itself out in it's own time. From the perspective of the technologist, money is a means to acquire the necessary resources.  Technology works or does not work and putting more money on a project does not correlate to technical performance or functionality.  Capital investors just do not get this simple concept because the financial investment is treated as a universe unto itself.  They can become incapable of seeing outside of their universe.

8. The total true vision of technology is lost when financial terms are signed.

Financial terms destroy the long term potential of technology by forcing an artificial focus on solutions that have short term economic value.  This obscures the true potential of the technology. It can also can create fear and  animosity between the entrepreneur and the source of funds.  From the investors perspective the entrepreneur may not be realistic or can even be a fraud.  From the entrepreneur's perspective the investor may be leveraging short term capital for control of the company.  Sometimes this  animosity is justified.  The fact is that the terms reflect the fact that the commitment of the entrepreneur is not the same for the investor and the entrepreneur. This is the barrier that must be overcome. 

9. Outside "Experts" that are asked to evaluate technologies are by definition biased.

All technical experts have personal and professional investments in what they do.  They could not be experts if they didn't.  Sometimes these experts even have hidden economic ties. But many are simply snake oil salesmen and the oil they sell is their reputation.  Others are so called technical wiz kids with absolutely no work history.  It is clearly not enough for investors to evaluate the technology.  The also have to evaluate the experts that evaluate the technologies.  They need to look more at the capabilities and depth of the expertise and less at the surface gloss.             

10. At the end of the day, the big dogs generally win.

Those who have the resources are fearful that their technical investments will subverted by new technologies.  The forces of industry exist to separate the opportunity from the originator.  This resistance is at play with entrepreneurs every step of the way.  If they can not buy out the new technologies, they can bad mouth it to destruction.  "Experts" for any view can be purchased and put to work. The big dog technology companies win because they have the greatest existing resources, not because they have the best technology. The well known but hidden agenda in all of this is that these same big dogs may want to bury the technical bones they acquire in order to protect their existing investments.    

 

In their financial philosophy to make profits, the investor has influenced the potential of the technology in which they are investing.  They hear the words but do not really understand the vision.  They isolate the inventors and attempt to realign the entrepreneurial business too often before making the technology functionally useful. Of course when the tech market takes a downturn the blame is placed on the technology.  The investor capitalist who create the problem become vapor as they exercise their exit strategies to leave the corporation and the majority of investors to take the loss.    

To respond to this article click on  Editor@NoiseToKnowledge.com .

 

 

 

 

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Copyright (c) 2001-2007 RDFollendoreIII All Rights Reserved