Friday, April 24, 2009

Where Do Thriving Businesses Come From?

When progressives talk about business, I often get the feeling that they think successful enterprises just pop up naturally, like weeds in a vacant lot. They forget (or were never aware of) the talent, energy, and risk exposure that are entailed in creating and maintaining a thriving business, whether it's a mom-and-pop store or a publicly traded corporation.

Vice Chancellor Leo Strine, of the Delaware Court of Chancery, understands the challenges that entrepreneurs must overcome in trying to build the businesses that we all rely on for providing goods and services we need, as well as our livelihoods. In an opinion that Vice Chancellor Strine issued yesterday, he held that a company will not be judicially dissolved "merely because [it] has not experienced a smooth glide to profitability or because events have not turned out exactly as [its] owners originally envisioned[.]" We have to assume that many businesses will face financial trouble:

[S]uch events are, of course, common in the risk-laden process of birthing new entities in the hope that they will become mature, profitable ventures.

I love the metaphor he uses here -- comparing the creation of a business to childbirth and child rearing. The process is risk laden. Dedicated, intelligent nurturing is needed for the new entity to become a mature venture that creates value.

(The case is In re Arrow Investment Advisors, LLC, C.A. No. 4091-VCS, slip op. at 6 (Del. Ch. April 23, 2009).)

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