Nurturing small firms<\/p>\n
They are known as venture capitalists -- two words which in
\nmost developing countries, including Indonesia, have negative or
\neven exploitative connotations. But it was these capitalists and
\nseveral tycoons that President Soeharto summoned for a special
\nmeeting on the development of small enterprises at the
\nPresidential Palace in Bogor, West Java, over the weekend.<\/p>\n
The capitalists represented 20 venture capital companies from
\n19 provinces which were established over the last three years by
\nthe government, through state-owned PT Bahana Artha Ventura, in
\ncooperation with big businesses. Venture capital, though largely
\nthe concept of liberal economies, has proven to be one of the
\nmost effective ways of fostering small, start-up businesses.<\/p>\n
Venture capitalists provide the vital infusion of funds -- in
\nboth equity and loan funds -- to help small, budding enterprises
\nblossom. As they also share the risks of the business, venture
\ncapitalists usually package their financial participation with
\nmanagerial and marketing assistance as well as consulting
\nservices. But as their name suggests, venture capital companies
\nare not charity organizations but are business entities seeking
\nprofit.<\/p>\n
The main difference between venture capitalists and other
\ninvestors is their daring operations in that they venture into
\nsmall, new businesses which have no proven track record and are
\nnot bankable. The risks are understandably usually high but the
\npotential returns also are very big. No wonder, venture capital
\ncompanies raise their funds mostly from shareholders.<\/p>\n
Venture capital really suits the needs of small enterprises
\nwhich barely own assets that can be offered as collateral for
\nbank loans and have no proven track record to qualify for listing
\non stock exchanges.<\/p>\n
The government therefore decided a few years ago to develop
\nventure capital as another effort to help accelerate the
\ndevelopment of small businesses and prodded big businesspeople to
\nbecome their main shareholders. The idea was to set up at least
\none venture capital company in each province to help foster local
\nsmall, start-up businesses. President Soeharto himself led the
\ninitiative by joining several of the companies as a shareholder.<\/p>\n
As venture capital companies can thrive only if the businesses
\nthey join as shareholders grow and turn a profit, they should be
\naggressive in identifying start-up businesses with high-growth
\nprospects. Venture capitalists reap profit from dividends and
\ncapital gains when they later divest their equity investment
\neither through private placement or share issues on stock
\nexchanges.<\/p>\n
It is obviously too early to assess the performance of the
\ncountry's venture capital companies, given their relatively short
\nperiod of operations. But as reported by Minister of Finance
\nMar'ie Muhammad at the Bogor meeting, their records are not bad
\nat all. The venture capitalists, Mar'ie said, had so far assisted
\n112,765 small firms with total employment of around 139,160.<\/p>\n
Venture capital companies can not simply pour money into small
\nenterprises as business viability and potential growth remain the
\nprerequisite for their participation in start-up enterprises. But
\nas they gain more experience, they will become more skilled at
\npicking potential winners among small enterprises. Of most
\nimportance, though, is that venture capitalists offer what has
\nproven to be the most effective program to help develop small
\nbusinesses -- a fully integrated assistance package.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/nurturing-small-firms-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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