In a previous interview I did with the late David Thomson I asked him what he thought was the biggest deterrent to an emerging growth company’s success. To my surprise he said, “the corporate board”. His response really got me thinking about why this is and why no one is really talking about it. Fortunately only a few months later, Adam Epstein wrote a great book talking about this topic as it relates to micro-smallcap companies.
Of utmost importance is Adam’s background and experience as a micro-smallcap investor: Mr. Epstein is a corporate director, and a special advisor to small-cap companies through his firm, Third Creek Advisors, LLC (“TCA”). Prior to founding TCA, Mr. Epstein co-founded and was a principal of Enable Capital Management, LLC (“ECM”). During his tenure, ECM’s special situation hedge funds invested in more than 500 small-cap financings in the United States, the European Union, and Australasia.
A vast majority of the country’s job creation comes from small businesses and smallcap companies, so it’s important to provide a platform for small companies to grow and prosper. The common thread amongst small startup companies (private or public) is the need for capital. Public companies have an added degree of complexity and expense just to be public, and this added complexity can be a huge noose around the company’s neck if it doesn’t have the right experience on the management and board level.
The main premise of the book is looking at all the reasons why small cap companies fail which almost always stems back to bad decision making at the management and board level. I found the book very helpful to even someone like me who makes his living exclusively from investing in microcap stocks. Adam does a great job presenting the most common mistakes smallcap companies make when raising capital, dealing with the capital markets, and hiring service providers. The book is a must read for any company officer and serious investor in the micro-smallcap arena.
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