* Lecture Outline * Venture Capital, Private Equity and Alternative Asset Classes * The Venture Capital Cycle * The Capital Gap - Why Venture Capital is Needed? * Overview of the Venture Capital Industry * Venture Capital, Private Equity, and Alternative Asset Classes * Venture Capital, Private Equity and Alternative Asset Classes * The purpose of venture capital is to provide capital to new, young and growing ventures. * New ventures posses characteristics that make it extremely difficult to attract financing. * Therefore their financing can not take place in mainstream investment markets. * Thus they are considered an “Alternative Asset Class” * What are Alternative Asset Classes? * Traditional Assets * Publicly Traded Shares * Bonds (fixed income) * Foreign exchanges * Commodities * Real Estate * Alternative Assets?
Australian Investment Grade Notes and Coins:
18% annual return from 2002-2004 * What are Alternative Asset Classes * Investments that * Have a limited investment history * Have clearly differentiated features from traditional asset classes (e.g. liquidity) * Requires specialist skills to manage * These features make them less common in investment portfolios. E.g. Art, Films, Notes and Coins, Ostriches etc. * Venture Capital and Private Equity Funds are some of the most common alternative investments vehicles available to investors in the global marketplace. * What is Venture Capital/Private Equity? * Venture capital provides finance for start-up firms that require substantial capital to expand and can not usually access it from conventional sources. * Venture capital is a sub-class of private equity * Private Equity (non-venture capital) can be used to fund * Troubled and distressed firms who also encounter difficulty in raising capital for restructuring. * Buy-outs of large, stable, mature but underperforming firms. * In general Private Equity and Venture Capital funds invest in high-risk high-reward firms. * What is Venture Capital/Private Equity? * Private equity investors do not only use their own funds. They raise the bulk of their funds from financial institutions and high net worth individuals * Pension Funds and University Endowments (in the US) are the most common sources of Funds. * How big are these Endowments in Australia? * Asset Allocation to Alternative Assets * Why Invest in Private Equity? * What is the Course about? * The Venture Capital Cycle * The Venture Capital Cycle * Entrepreneurs have many ideas that require substantial capital to implement but lack the funds * Usually such entrepreneurial projects lack tangible assets, expect several years of negative earnings and have uncertain prospects. * As a result it is difficult to attract funding to these projects * The Venture Capital Cycle * Venture Capital Funds are one-type of solution to the funding problems of these firms. * The Venture Capital Cycle - The Roles of Venture Investors * Maintaining Relationships with Investors * Mainly pension funds, university endowments and rich individuals * Venture capitalist ‘raise a fund’ on a periodic basis (every 3-5 years) * Funds are structure as “Limited Partnerships” and last for about 10 years * Eventually funds are returned to investors and a new fund is raised * The Venture Capital Cycle
The Role of Venture Investors * Review of Proposed Investments * Hundreds of proposals are received * Few are selected after intense scrutiny * Acceptance is often conditional upon approval of a syndication partner. * Monitoring Current Investments * Venture capitalists intensely monitors management, sometimes through representation on the board * Funds are dispersed in stages * Funding is in
your reasoning. 2. Please give 3 reasons as to why venture capitalists are interested in the overall sector. 3. If you were a venture capitalist, would you invest now in Feed? Why or Why Not? What would you change your mind? 4. Whom should Shane and Ryan approach for financing and how would you prioritize the order between family & friends, angels, the government, customers, and others you can think of? PunchTab 1. Now that he is raising capital for his second business, how is Kamara’s situation…
• Raising Capital, Third Edition by Andrew J. Sherman (AMACOM, April 2012) • Harvesting Intangible Assets: Uncover Hidden Revenue In Your Company’s Intellectual Property by Andrew J. Sherman (AMACOM, October 2011) COURSE FOCUS: This course will focus on various entrepreneurial finance and growth strategies, including venture capital and private equity using a combination of lectures, guest speakers and supplemental materials. Our focus will be on the capital formation process…
Venture Concepts Paper Marvin Raymond Fin/375 Financial Management in Small Business 05/20/2013 Venture Concepts Paper There are a variety of watch brands available to the consumer, there is your regular digital watch as well as some that look like rings, uniquely designed watches embroidered in precious stones. The wrist watch has always been a very popular accessory, and is seen as an essential wardrobe piece by some selling them…
For the exclusive use of S. SWAIN, 2014. 9-805-033 SEPTEMBER 21, 2004 WILLIAM A. SAHLMAN Valhalla Partners Due Diligence It was March 2002, and Art Marks was sitting around a campfire in the Blue Ridge Mountains with two friends from the venture capital world, Gene Riechers and Hooks Johnston. They'd had a few drinks. They'd told some jokes. But, like retired athletes who can't help rehashing old games, the campfire conversation kept circling back to the same place, back to the same topic, and…
Athleta In this case, the management team of Athleta wanted to raise money for its growth plans. There are three choices: venture capital; angel investors; and commercial banks. In my opinion, the company should first turn to commercial banks, negotiating credit lines with one or several different commercial banks in order to finance the company’s growing inventory. It could buy them enough time to raise the Series E from other sources; then, they should improve its business model and plan to attract…
Venture Capitalists on the Seed Stage Arena A Fit or Misfit Johan Adolfsson Avdelning, Institution Division, Department Datum Date 2003-06-03 Ekonomiska Institutionen 581 83 LINKÖPING Language Svenska/Swedish X Engelska/English Report category Licentiatavhandling Examensarbete C-uppsats X D-uppsats Övrig rapport ____ ISBN ISRN Ekonomprogrammet 2003/30 Serietitel och serienummer Title of series, numbering ISSN URL för elektronisk version http://www.ep.liu.se/exjobb/eki/2003/ep/030/…
investment. Finance deal with matters related to money and the markets. Finance means to supply with money or capital;obtain money or credit for. There are three main sources available for a bisiness: 1)business angels 2)venture capital 3)business growth divided in: -internal sources -external sources 1)Business angels-are wealthy entrepreneurial individuals who provide capital in return for a proportion of the company equity. They take a high personal risk in expectation of owing part of…
The successful venture life cycle 5 life cycle stages: a) Development stage: Feasibility of an idea is first put on trial Comments and initial reactions from friends and family member Form an initial test of whether the idea seems worth pursuing further Reaction and interest level of trusted business professionals provides additional feedback If early conversations evoke sufficient excitement, the entrepreneurs take the next step: producing a prototype, delivering a trial service, or implementing…
Entrepreneurship: Successfully Launching New Ventures, 4e (Barringer/Ireland) Chapter 10 Getting Financing or Funding 1) inDinero, the company profiled in the opening feature for Chapter 10, is described by its cofounders as "the fastest way for small businesses to manage their finances." Which of the following is not true about inDinero's founding story? A) In 2009, inDineor's founders applied to TechStars, which is a Boulder, CO-based seed-stage fund/incubator, and were turned down. B) The…
DIFFERENCES? JOHN FREEAR, JEFFREY E. SOHL, and WILLIAM E. WETZEL, JR. Center for Venture Research University of New Hampshire The market for informal venture capital is an elusive and nearly invisible source offinancing for entrepreneurial ventures. This marker consists of a diverse set of high ner worth individuals (business angels) who invest a portion of their assets in high-risk, high-return entrepreneurial ventures. The emerging consensus of the characrerisrics of the individual investor is that…