“The Role of Capital Market Intermediaries in the Dot–Com Crash of 2000”
FIN 321: Financial Management II
Case #1
1. Identify all of the major players that play an intermediation role between individual
investors and entrepreneurs/managers. What is the intended function of each of
these intermediaries?
a) Venture Capitalist (VC): Venture capitalists work as the business “screeners”
separating the bad from the good businesses. Once a good business, or entrepreneurial
team is selected the VC’s provide capital for companies in their early stages, and help
them to grow into a fully functional company. A company that has reached adequate
growth with the help of VC’s would then be ready to face the public through an IPO.
Partners in a VC firm are very experienced, savvy business professionals who work
closely with their portfolio companies to monitor and guide them.
b) Investment Bank Writer’s: Investment bank writers are the actual intermediaries
responsible for getting the process started for an IPO. Investment Bank Writers provide
financial services, helped price offerings, and introduced the businesses to potential
investors.
c) Sell Side Analysts: The Sell Side Analysts publish research on public companies. They
help form relationship with 15 to 30 companies in a particular industry and talking to the
managements of the companies, they follow trends in the industry, and ultimately making
buy or sell recommendations on the stocks influencing investors
d) Buy Side Analysts and Portfolio Managers: refers to institutions that do the actual
