Dressed for success
Investing money wisely is one of the principles that has made Gerard Lopez successful. The co-founder and managing partner of Mangrove Capital Partners was a guest speaker at the Alfi (Association of the Luxembourg Fund Industry) Spring Conference in Luxembourg.
“We are certainly no experts at running a government, but we know how to create value and how to create jobs. That is why we don’t understand why governments continue to protect jobs that can’t be saved instead of putting money into sectors that create jobs and wealth”. Gerard Lopez admitted that in his industry – the venture capital and private equity area – there is some frustration when he sees what happens to taxpayers’ money.
But the founding partner of Genii and Chairman of the Lotus Formula One team has a solution to solve this conundrum. “There is space for government funds to participate in this industry by either using existing mechanisms or creating new ones. This is because jobs are created at start up companies and not necessarily at companies with a history of a hundred years or more”.
Mr Lopez’ main objective at the Alfi conference in Luxembourg was to explain the benefits of venture capital and private equity. On the one hand, you have venture capital, which by its very nature creates jobs. If you start a company with three people and end up with hundreds or in some cases even thousands of employees, you have created many jobs. “On the other hand, you have private equity; you take over a company, improve efficiency and cut down jobs, which is perceived as something negative. Cutting jobs doesn’t have to mean losing jobs”, he continued.
In order to have an increase in GDP, you need three things: an increase in consumption, investment and taxation. He set the facts straight by explaining that increasing taxes doesn’t mean that increasing them percentage wise but increasing total tax revenue. Unfortunately, politicians see it differently. “They just look at the next elections and it is easy to say that taxes will increase or decrease. It is more difficult to explain why you increase tax revenues by increasing taxable bases in terms of growth”.
Gerard Lopez came up with impressive figures underpinning the creation of growth and wealth by venture capital (VC). One dollar invested in VC in 1970 represents about $ 6.27 today, while 0.2 of GDP invested then generates 21% of total GDP of the US today. European investors seem to shy away from this asset class in spite of the fact that it performs better in Europe than in the United States. There seems to be a reason for this misconception. “It is a fact that the US gets all the big stories. It has an integrated stock exchange; you have a country that is more united whereas we are very fragmented in Europe”.
In his speech, Gerard Lopez also mentioned success stories like Skype and Brokat, which his company invested in at an early stage. “Fifteen years ago, there was a fresh idea that turned into a first company and then into a whole industry. The people who hold the key to the budgets and do everything in their power to save existing jobs never think about this. Look at a lot of big companies and the value and jobs they have created. They were financed earlier on by venture capitalists.
In 2003, Skype set up its global headquarters in Luxembourg because of the relationship we built with them. eBay and PayPal then followed”. These were wonderful first examples that led to others. Politicians understand quite well the benefits of venture capital, but seem to have trouble selling its merits to their electorates. CW