Making a Mint Overnight

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enthusiasm for new issues reminds some observers of the frothy Wall Street markets of the late 1960s. During that period, stock in a company called National Student Marketing, which promoted and sold products to college students, went from $6 to $71.50 before losses began to appear. The price ultimately fell to 88¢. Four Seasons Nursing Centers of America at that time was building a nationwide chain of healthcare facilities for the aged, and its stock went from $11 to as high as $117 with the help of artificially inflated earnings. It later went bankrupt.

But even though investors sometimes self-destructively bid prices up to the stratosphere, they now appear to be shrewder. Observes Investment Banker Hambrecht: "In the late '60s the market was driven by a public craze totally focused on the short term. Today's new issues have a reasonable chance of success rather than being a patent rip-off of a hot market."

Whatever the possible excesses of Wall Street today, young companies are still eager to take their chances, and investors seem ready to put down their money. Each week a dozen or more new firms surmount the legal hurdles and prepare to endure the vicissitudes of the market. A host of initial public offerings are scheduled for early this year. They include: Integrated Device Technology, a semiconductor manufacturer; Consolidated Stores, which owns two discount retail chains; Dow B. Hickam, a pharmaceutical company; and Vie de France, a chain of bakeries.

More than a generation ago, Economist Joseph Schumpeter predicted in his classic work Capitalism, Socialism and Democracy that large corporations would dominate the economy and crush the entrepreneurial spirit, ultimately leading to the collapse of capitalism. Schumpeter considered those daring businessmen the vitally important actors who give an economy dynamism, but postulated a time when a highly developed economy would have no need for new ventures because all consumer needs would have been satisfied. Wrote Schumpeter: "There would be nothing left for entrepreneurs to do."

In fact, there have probably never been more entrepreneurs at work starting new companies, making new products and creating new fortunes. In addition, they are giving vitality to the U.S. economy. In a new book titled The Technology Edge, to be published Feb. 21 (Simon & Schuster; $ 16.95), Princeton University Professor Gerard K. O'Neill writes: "Risky as venture capitalism is for the investor, it is extraordinarily productive for the country as a whole. It allows good new ideas to be turned into reality, rather than remaining as unfulfilled dreams. It stimulates and nurtures the creation of new companies in high-tech areas, where rapid growth is possible. That growth provides new jobs. And the people working at those jobs are learning skills that broaden their opportunities, preparing them for the decades of rapid change ahead." Thus while the new multimillionaires are making a bundle for themselves, they are also making the U.S. economy stronger.

—By Alexander L. Taylor III. Reported by Michael Moritz/San Francisco and Adam Zagorin/New York