Orphan's of Verizon

We had used Fairpoint as an example of what happens when Verizon found some group to buy off their junk. Two are front and center. First is Idearc which took the yellow pages and declared Chapter 11 March 31st of this year. The second we have been following is Fairpoint which is struggling to say the least. The following is the financial stats for both. They show the debt problem we have been arguing is one of the next collapses to occur.
























Note that we cannot overemphasize the impact these ongoing bankruptcies will have. Verizon got rid of the junk but someone bought it. They also got rid of Hawaii Telephone which also had its problems, an orphan of the Carlyle Group. They filed for bankruptcy in December 2008. More than likely Fairpoint will also suffer the same fate. The question is why did the regulators ever allow this to happen. Four states, almost 10% of the states in the US were allowed to have their telephone systems sold to owners in a manner which clearly was not viable. This was know before the sale in New England but the regulatory agencies just disregarded all facts. Generally they lack the competence to undersand the issues.

At the other extreme is the wasteland which has become the playing field for the VCs. We know that all too well. The Financial Times states:

"Entrepreneurs fighting for more government support for start-up companies will find plenty of ammunition in the latest venture capital investment figures. VC investment in the US fell by half in the first quarter, according to Dow Jones VentureSource – to its lowest level in 11 years. Investment in the UK is also down sharply. Series B rounds, injections of $10m-$20m into more established companies, have been particularly hard hit as financiers struggle to raise new funds from institutional investors. Start-ups risk withering on the vine.

Governments are under pressure to help bridge the funding gap. The UK is mulling a government-backed fund of funds that would give cash to existing VC groups. There is a 50-50 chance some kind of start-up support scheme will be included in the chancellor’s Budget this week. Entrepreneurs in the US have proposed similar schemes"

Now the orphans of Verizon are bad enough but if we get the Government involved in VC that will be the death of the entrepreneur in the United States. The VC business is ruthless, brutal, and Darwinian. People hate VCs unless you are one. I have played both sides of the street. My investors were unbearable at times, but it was their money, and mine. My investments were a real mixed bag, despite the due diligence. The VC world requires smart people who take risks at the edge and can make decisions quickly to maximize returns and minimize losses. This is not what the Government could ever do. Thus beware, avoid Government help at all costs. Imaging having the IRS, worse Homeland Security, on your Board!