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BUSINESS
C&EN TALKS WITH
August 6, 2001
Volume 79, Number 32
CENEAR 79 32 p.25
ISSN 0009-2347
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GORDON CAIN
Leveraged buyout titan, now a venture capitalist, issues second edition of his autobiography

MARC REISCH

Gordon A. Cain is still an iconoclast. He started to buy and sell billion-dollar businesses 20 years ago when most men would have retired. And for the past seven years, this 89-year-old gentleman has become an investor in high-technology start-up businesses.

"Some think the new economy is a young person's game in which the ordinary rules of business no longer apply. They are wrong on both accounts."
7932gordon
PHOTO BY MARC REISCH
Though he needs daily kidney dialysis, he goes into the office regularly and has just updated his four-year-old autobiography: "Everybody Wins! A Life in Free Enterprise." The second edition, a paperback published by the Chemical Heritage Foundation, contains an epilogue Cain wrote telling some of what he has done recently. But Cain had a lot more to tell C&EN.

In his autobiography, Cain informs the reader how he came to be an entrepreneur and provides the behind-the-scenes details of the big deals--the formation of Cain Chemical and Sterling Chemical--that shook the petrochemical industry in the 1980s and 1990s, netting him, his partners, and company employees millions of dollars.

But Cain has a number of new deals in the works now. He has lost interest, he says, in petrochemicals, and doesn't keep up with that industry any longer. His new favorites are carbon nanotubes and biotechnology.

He continues today with the same overriding philosophy of investment he preached in the 1980s: everybody wins. This is an entrepreneur whose exploits are not of the rapacious sort.

For Cain, shareholder rights means everybody shares in the success. All the employees in the small ventures he is growing today have equity interests in those businesses. "It's better if they all have a stake," he says.

"I got bored with the chemical business," says Cain. He hasn't followed the travails of Sterling Chemical, which filed for bankruptcy reorganization last month. "I got out at what I thought was the right time."

What was Cain Chemical isn't doing all that well today either. Occidental Chemical bought Cain in 1988 and placed it in the now struggling Equistar Chemicals olefins venture in 1998.

Cain says he had a fling with the airline business after his exploits in the petrochemical industry. One was a failure: UltraAir. But one was a success: Atlantic Coast Airlines. "I am embarrassed to say how much I paid for my Atlantic stake," says Cain. In fact, Cain paid $1.00 a share in 1991 for stock worth $25 a share in today's market.

But what really thrilled him beginning around 1993 was the biotechnology industry. "It's so big and has so much potential, there is enough there to keep me busy as long as I want," he says.

He has invested in three companies: Lexicon Genetics, Applied Veterinary Systems, and Agennix. Cain is a director of the first two and is chairman of the last. "I'd rather do this than play golf," he says.

But then he confesses, "The truth is I quit golf about a year ago. My legs don't stand up as well as they once did. But I do play some croquet and otherwise get around pretty well."

Cain says he "just never could get into the Internet." He says he didn't understand the dot-com companies and how they worked. In his revised autobiography, he adds, "Some think the new economy is a young person's game in which the ordinary rules of business no longer apply. They are wrong on both accounts."

Part of the problem with Internet-related businesses was that "there was so much money chasing deals." Plus, many of those businesses were not based on sound management principles. But then the bubble burst in early 2000, and many of the creakiest Internet-related companies failed.

While Cain has shied away from putting his money into Internet-related activities, the "Grandpa Moses" of the venture-capital set is investing in other "new economy" companies. "There is not as much money chasing deals today as there was even a year ago. But there are actually more opportunities now for people who have the money," says Cain.

Cain believes the best opportunities in the new economy are for developers of new and untested scientific discoveries. His latest deal involves carbon nanotubes. The ultrasmall tubes are stronger than steel and conduct electricity 10 times better than copper. "Anything that interesting should have some use," Cain says.

To make more than the handful of nanotubes that now can be produced in the lab, Cain and a few partners invested $18 million in Carbon Nanotechnologies Inc. (CNI). A new facility just outside of Houston will turn out a few pounds a day of nanotubes within the next six months for customers such as IBM and General Electric.

Though on a much smaller scale than Cain Chemical, everybody can win here, too, if the demand for nanotubes takes off. Rice University along with chemistry and physics professor Richard E. Smalley--who shared the 1996 Nobel Prize in Chemistry with Robert F. Curl Jr. and Sir Harold W. Kroto for the discovery of buckminsterfullerene (C60)--also have stakes in CNI.

As he approaches his 10th decade, Cain remains an iconoclast. "I still feel strongly about sharing the wealth," he says. "I don't base that feeling on any moral principles. I'm selfish, and I want to succeed. But I think an entrepreneur is more likely to be successful if the people he funds have a stake in the business, too."

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