FIN310 - Venture Capital - Investing in early stage growth companies – Lecture 1
Brendon Blacker
Monday 24 March
Introduction to your guest lecturer
Brendon Blacker
Vice President
Macquarie Capital Sydney
STRICTLY CONFIDENTIAL
2
Agenda
Lecture 1 – Monday 24 March 2014
1. Introduction to Macquarie Capital
Lecture 2 – Monday 31 March 2014
— Review questions
— Quick recap
2. Introduction to venture capital
— What is venture capital? How does it work?
3. Investing in early-stage growth companies (continued)
— Who are the main players globally and in Australia?
— What do venture capitalists look for in an investment?
— And… the difference between venture capital and private equity
— How do they make investment decisions?
3.
…show more content…
2.
Fund Raising
Typically takes six months to a year to obtain capital commitments
Capital can come from state and corporate pension funds, public and private endowments and personal investors
Investment Sourcing
Can take between three and six years and is comprised of:
— Sourcing investments: identify and source opportunities
— Due diligence: extensive research and analysis is done on the company and in the market it operates in
— Initial investment
— Often, venture capital firms preserve an appropriate percentage of their funds to participate in follow-on fund raisings for their portfolio companies
3.
4.
Portfolio Management
The aim of this stage is to help the portfolio companies grow
Venture capital firms typically appoint representatives on the company’s board and offers strategic advice to the management team
Closing
Often funds are 10 year closed-end funds in which it is expected that all investments will be exited and the fund wound up in
10 years
Exit of investments by way of IPO, sale to a third party (eg trade sale) or wind-up
STRICTLY CONFIDENTIAL
11
How do VC’s add value?
Network: providing a network of potential clients and partners to help build relationships
Recruitment: assisting and identifying, interviewing and assessing talent for the business and for the Board
Financing: assist in raising additional equity, debt or lines of credit
Domain knowledge: specialist knowledge of industries
and
The Joint Commission is scheduled to visit Nightingale Community Hospital for its triennial accreditation survey within the next 13 months. The purpose of this document is to provide senior leadership with an outline of the hospital’s current compliance status in the Priority Focus Area of Communication. Recommendations for corrective action are included in this document which are designed to bring the organization into full compliance in the areas where deficits have been identified.
Usually, Apex sought to be the leading investor whatever the stage in order to have one of its representatives join the board of the financed companies. Furthermore, Apex pursues to balance its investments between start-up and
Private equity investments are primarily made by private equity firms, venture capital firms, or angel investors, each with their own set of goals, preferences and investment strategies.
Checklists may sound well and fine for business flying and solution however business is much excessively complex for Checklists, making it impossible to be practical. Indeed, consider the universe of money where investors are continually underweight to purchase stock in the following huge thing before it really gets to be effective. This is the challenge which confronts "Value Investors" who are not attempting to time the business sector or coattail any theoretical air pocket which may be preparing in the business sectors. These investors are essentially attempting to purchase offers in under perceived, underestimated organizations and to remain contributed for the long run.
This structure may perhaps serve to keep sufficient equity available for a subsequent venture capital injection, but given the dynamics of the agreement with Telerate, the prospects of the company should be fairly obvious after only a few months, and, in the event of a successful marketing program, net-profitable within only six. Therefore, it is unclear what the
The five partners of Capstone Accountants will invest $20,000 each to the start-up of the business. In addition to the initial $100,000, the firm will need an additional $200,000 towards the startup costs. To gain these additional funds, the firm will explore outside funding options.
·It would take a lot of time to talk with unfamiliar company from a fresh start
Traditional avenues to secure financing have historically been through commercial banks (Types of Financing, 1996). The economic turmoil during the
"Are there sources of equity capital that will make it more likely for a company with both financial and social or environmental objectives to succeed?
is made in advance, and the proceeds are either held in trust or invested in an insurance policy (that
The money collected is invested in capital market instruments such as debentures, shares and other securities. The income which is been earned or got from this investment or even from capital appreciation is distributed or shared by its unit holders in proportion to the number of units owned by them.
Venture capital has been the driving force behind some of the most vibrant sectors of the US economy over the past two decades. Venture capitalists were instrumental in fostering the tremendous growth of firms such as Microsoft, Compaq, Oracle, and Sun Microsystems, which were all founded less than 20 years ago, but have rapidly become dominant players in the high technology arena. While the contributions venture capital makes to the economy overall are underexplored, there exists a widespread belief that
Private Equity (PE) investment is an asset class that is bought and sold in a privately negotiated transaction and is not publicly traded on a stock exchange. This investment is normally completed by private equity firm, venture capital firm, or an informal investor named business angel. They raise funds and invest it on behalf of their investors. There are four most well-known investment strategies, i.e. venture capital (VC), leveraged buy-out (LBO), mezzanine debt and distressed debt investments. It is distinguishable that VC usually targets the start-up firms while LBO purchases majority control in a developed and mature firm. The total global PE assets under management (AUM) in 2013 has climbed up to $3,466 billion, the highest value to date and has remained a steadily growth throughout the past 6 years after financial crisis (Appendix figure 1). This is partially attributed to a sharp decline of exit activity resulted from crisis, led to more capital calls, improved fundraising and thus expansion of AUM.
The VC industry itself is divided on the basis of the different stages of investment. Angel investing refers to individual investors, who are often the first group of investors in a new enterprise, who provide capital and mentorship. Angel investors invest in companies before VC firms, who invest in the next round of fundraising, what is often dubbed as Seed Stage, which accounts for about 2% of total VC investments (NVCA). At the Seed Stage, the portfolio company has just been founded, and its product is still in development. (NVCA) Clearly, at such an early stage, it is nearly impossible to make any meaningful financial projections, since the company lacks a product to offer.
Firms raise this capital when they are short of other options. The firm has a basic model, but it lacks the capital that will take it to complete heights. This is especially so to a firm that has an interest to trade in the markets in the future. The firm approaches another reputable and stable company for help. The situation is advantageous where especially where the reputable firm is within the same field. The smaller firm approaches the potential financier with the idea stage and then if the company approves of it, the firm receives finances in the form of capital. The conditions that are most imperative in the raising of this capital are that the business model needs to be extremely elaborate (Brooke 2009). The financier should get the plan easily, and the amount of finances has to be large enough because many of them do not appreciate small investments. The investors should have full conviction of the plan for them to consider any channeling of finances.