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VENTURE CAPITAL
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VENTURE CAPITAL AS AN ALTERNATIVE TO THE STOCK MARKET ?
Getting an investment opportunity in front of a serious venture capital firm is quite difficult. They simply haven't the time to sort through (by reading) hundreds of unfiltered unsolicited business plans, so they accept plans only from sources they know will send them opportunities that meet their investment criteria. Furthermore, greater than 99% of all other investors aren't listed on the Internet or in any directory of any type and cannot be found by searching the web. Investors want and need a reliable way to find and identify the best investment opportunities in an organized way.
NEXT WEDNESDAY - October 31st - is the deadline to both submit your plan to apply to present at the 7th Annual New England Venture Summit being held on December 5th, 2012 at the Hilton in Boston/Dedham MA, as well as the deadline to take advantage of the "early bird" registration savings discount of 50% off. Connect
with leading Early Stage VCs
Whether you’re an investor actively seeking new deals, or an emerging company seeking funding, this is the one event you won’t want to miss! To
register now and save 50% off, click
here CALL FOR TOP INNOVATORS! SEEKING CAPITAL & EXPOSURE?
If
you are a Startup
seeking capital and/or partnerships submit your plan
for the opportunity to present at The 2012 New
England Venture Summit, the premier venue connecting
emerging growth companies with active Venture capitalists, Angel
investors, Corporate VCs and Investment Firms (see testimonials
below). "Early
bird" registration
discounts of 50% off expire NEXT WED. October 31st. Startups:
Regular $795 - Now only $395 To
register now and take advantage of the "early bird" rates Click
here.
Where
Innovation Meets Capital
“It’s
a terrific forum for young startups, entrepreneurs, venture
capitalists, even service providers, to come together.” “I have
met a number of new companies and also have a chance to reacquaint
myself and reconnect with some companies that I have met prior and
catch up on their progress.” “I have made a lot of connections
here, it’s great”
Paying a big upfront fee to list your business opportunity in a Venture Capital network, or a matchmaking service, may yield disappointing results. Once a matchmaking service has your upfront investment it becomes a financial loss to them to further market their services and your plan to investors. Their marketing expenditure goes into increasing the number of investment opportunities they have, because that represents profit, while building and maintaining their investment network, and providing you with success, represents a loss.
Through traditional means an average company seeking financing is able to get 3 or 4 serious investors a month to actually read their business plan. Hence raising funding is an expensive and time consuming business in itself, yet without funds to build your business, what are the options? If you are reading this page, it is because we have ensured you would read it. It is no accident. We have toiled to get ourselves noticed by those with money to invest.
The problem is Equity Houses will generally only invest in vetted businesses, one adept at playing that particular game. This often leaves startup companies with much to offer, out in the cold - simply because they are not conventional enough. If a business is trained, it is likely their train or though and marketing is also trained. It is less likely their product or marketing will be anything other than trained, and if so, it is likely the growth rate for any given proposal will also be trained. Whereas, the very nature of Venture Capital is taking a risk to achieve big rewards. It is part of the territory - a sort of huge calculated gamble. Obviously, the emphasis is on the calculated part. This is why many investors prefer to invest in a market opportunity, of which they have some expertise.
But how can you identify a company with the kind of growth potential to invest in? It's not easy. To begin with their is new technology: E.G the computer. Then there is software: E.G. Microsoft. But who would have guessed that Microsoft was the part to invest in. Hence, perhaps look for something like the software bit. The computer market was already huge and growing, but growth is slowing, because the investment peak has passed. Fortunately, there are similar investment opportunities: the Ipod, all the time.
On this site there are several investment proposals which may be of interest to venture capitalists who, apart from benefiting from substantial growth, might assist several worthwhile projects for the good of mankind. You need to invest your money to make money, but why not help to preserve the environment at the same time. How often are you offered that?
New LSE building Paternoster Square
ABOUT VENTURE CAPITALISTS
Venture capital is capital provided by outside investors for financing of new, growing or struggling businesses. Venture capital investments generally are high risk investments but offer the potential for above average returns. A venture capitalist (VC) is a person who makes such investments. A venture capital fund is a pooled investment vehicle (often a partnership) that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans. Venture capital fund operationsThe VCs and their partners
Venture capital general partners (also known as "venture capitalists" or "VCs") may be former chief executives at firms similar to those which the partnership funds. Investors in venture capital funds (limited partners) are typically large institutions with large amounts of available capital, such as state and private pension funds, university endowments, insurance companies, and pooled investment vehicles.
Other positions at venture capital firms include venture partners and entrepreneur-in-residence (EIR). Venture partners "bring in deals" and receive income only on deals they work on (as opposed to general partners who receive income on all deals). EIRs are experts in a particular domain and perform due dilligence on potential deals. EIRs are engaged by VC firms temporarily (six to 18 months) and are expected to develop and pitch startup ideas to their host firm (although neither party is bound to work with each other). Some EIR's move on to roles such as Chief Technology Officer (CTO) at a portfolio company. Fixed-lifetime funds
Most venture capital funds have a fixed life of ten years. This model was pioneered by some of the most successful funds in Silicon Valley through the 1980s to invest in technological trends broadly but only during their period of ascendance, and to cut exposure to management and marketing risks of any individual firm or its product.
In such a fund, the investors have a fixed commitment to the fund that is "called down" by the VCs over time as the fund makes its investments. In a typical venture capital fund, the VCs receive an annual management fee equal to 2% of the committed capital to the fund and 20% of the net profits of the fund ("two and 20"). Because a fund may run out of capital prior to the end of its life, larger VCs usually have several overlapping funds at the same time; this lets the larger firm keep specialists in all stages of the development of firms almost constantly engaged. Smaller firms tend to thrive or fail with their initial industry contacts; by the time the fund cashes out, an entirely-new generation of technologies and people is ascending, whom the general partners may not know well, and so it is prudent to reassess and shift industries or personnel rather than attempt to simply invest more in the industry or people the partners already know. How and why VCs invest
Investments by a venture capital fund can take the form of either preferred stock equity or a combination of equity and debt obligation, often with convertible debt instruments that become equity if a certain level of risk is exceeded. The common stock is often reserved by covenant for a future buyout, as VC investment criteria usually include a planned exit event (an IPO or acquisition), normally within three to seven years.
In most cases, one or more general partners of the investing fund joins the Board of Directors of the new venture, and will often help to recruit personnel to key management positions.
Venture capital is not suitable for many entrepreneurs. Venture capitalists are very selective in deciding what to invest in; as a rule of thumb, a fund invests only in about one in four hundred opportunities presented to it. They are most interested in ventures with high growth potential, as only such opportunities are likely capable of providing the financial returns and successful exit event within the required timeframe that venture capitalists expect. Because of such expectations, most venture funding goes into companies in the fast-growing technology and life sciences or biotechnology fields. Because of these strict requirements, many entrepreneurs seek initial funding from angel investors. Winners and losers
Venture capitalists hope to be able to sell their stock, warrants, options, convertibles, or other forms of equity in three to seven years, at or after an exit event; this is referred to as harvesting. Venture capitalists know that not all their investments will pay off. The failure rate of investments can be high; anywhere from 20% to 90% of the enterprises funded fail to return the invested capital. In case a venture fails, then the entire funding by the venture capitalist is written off.
Many venture capitalists try to mitigate the risk of failure through diversification. They invest in companies in different industries and different countries so that the risk across their portfolio is minimized. Others concentrate their investments in the industry that they are familiar with. In either case, they usually work on the assumption that for every ten investments they make, two will be failures, two will be successful, and six will be marginally successful. They expect that the two successes will pay for the time given to, and risk exposure of the other eight. In good times, the funds that do succeed may offer returns of 300 to 1000% to investors. History
General Georges Doriot is considered to be the father of venture capital industry. In 1946 he founded American Research and Development (ARD) Corporation, whose biggest success was Digital Equipment Corporation. When Digital Equipment went public in 1968 it provided ARD with 101% annualized Return on Investment (ROI). ARD's $70,000 USD investment in Digital Corporation in 1959 had a market value of $37 million USD in 1968.
The first venture-backed startup is generally considered to be Fairchild Semiconductor, funded in 1959 by Venrock Associates. Before World War II, venture capital investments were primarily the domain of wealthy individuals and families. One of the first steps toward a professionally-managed venture capital industry was the passage of the Small Business Investment Act of 1958. The 1958 Act authorized the U.S. Small Business Administration (SBA) to license private "Small Business Investment Companies" (SBICs) to provide financing and management assistance to small entrepreneurial businesses in the United States. Passage of the Act addressed concerns raised in a Federal Reserve Board report to Congress that concluded that a major gap existed in the capital markets for long-term funding for growth-oriented small businesses. The goal of the SBIC program was, and still is, to stimulate the U.S. economy in general, and small businesses in particular, by facilitating the flow of capital to pioneering small concerns.
Venture capital is a phenomenon most closely associated with the United States and technologically innovative ventures. Due to structural restrictions imposed on American banks in the 1930s there was no private merchant banking industry in the United States, a situation that was quite unique in developed nations. As late as the 1980s Lester Thurow, a noted economist, decried the inability of the USA's financial regulation framework to support any merchant bank other than one that is run by the United States Congress in the form of federally-funded projects. These, he argued, were massive in scale, but also politically motivated, too focused on defense, housing and such specialized technologies as space exploration, agriculture, and aerospace. US investment banks were confined to handling large M&A transactions, the issue of equity and debt securities, and, often, the breakup of industrial concerns to access their pension fund surplus or sell off infra-structural capital for big gains.
Not only was the lax regulation of this situation very heavily criticized at the time, this industrial policy was not in line with that of other industrialized rivals—notably Germany and Japan which at that time were gaining world markets in automotive and consumer electronics. There was a general feeling that the United States was in an economic decline.
However, those nations were also becoming somewhat more dependent on central bank and elite academic judgement, rather than the more populist and consumerist way that priorities were set by government and private investors in the United States—a model that proved to have some advantages when the public's greed was strongly activated by the IPO of Netscape and other Internet-related firms. This highlighted the nearly invisible role that Silicon Valley had played in the sustaining of American economic innovation.
As of 2006 some of the most well known VC Firms are:
The dotcom boom
Due almost entirely to this dotcom boom, the late 1990s were a boom time for the globally-renowned VC firms on Sand Hill Road in the San Francisco, California area. IPOs were taking truly irrational leaps, and access to "friends and family" shares was becoming a major determiner of who would benefit from any such IPO; the ordinary investor rarely got a chance to invest at the strike price in this period.
The NASDAQ crash and technology slump that started in March 2000, and the resulting catastrophic losses on overvalued, non-performing startups, shook VC funds deeply. By 2003 many VCs were focused on writing off companies they funded just a few years earlier, and many funds were "under water"; that is, their portfolio companies were worth less than when invested in. Venture capital investors sought to reduce the large commitments they have made to venture capital funds. As of mid-2003, the conventional wisdom was that the venture capital industry would shrink to about half its present capacity in the following few years. However, PricewaterhouseCoopers' MoneyTree Survey shows total venture capital investments holding steady at 2003 levels through Q2 2005. The revival of an Internet driven environment (thanks to deals such as eBay's purchase of Skype, the News Corporation's purchase of MySpace, and the very-successful Google IPO) has helped to revive the VC environment. Non-US VCs
US firms have traditionally been the biggest participants in venture deals, but non-US venture investment is growing. The Indian Venture Capital Association estimates funding of Indian companies will reach $1 billion in 2004. In China, venture funding more than doubled from $420 million in 2002 to almost $1 billion in 2003. For the first half of 2004, venture capital investment rose 32% from 2003. External links
THE VENTURE CAPITAL INSTITUTE
The
venture capital industry has come of age and the Venture Capital
Institute is at the fulcrum of this evolution. When
the very first Venture Capital Institute was under development in
1974, the program was expected to have a two-year life cycle at most.
Twenty-six years later, the Institute has provided the educational
foundation that over 3,300 venture capital professionals have used to
become successful in their venture investing endeavors.
The Institute's Faculty
BOOKSTORE FEEDBACK SPONSORS SELECTED OUTLINES EDUCATION COMMITTEE
504
BANK SERVICES Commercial Lending Business Plans Haven't written your business plan? We write the best. Investment Representation Do you require assistance securing VC financing? We can represent you. Stock Swap Fund Need collateral? Buy stock from a hedge fund with your own stock. Companies listed with 504 Bank have a good success rate and build business contacts rapidly. 504 offers access to more than 7,000 registered investors, servicing more than 1,500 per day, and signing up more than 100 new investors daily.
504 Bank maintains a sizable and growing investment community. It locates investors by tapping into existing venture capital networks, pushing their content out to investment web portals, trade magazines, affinity groups, affiliates, and by sharing results based revenues, thereby finding the 99% of investors that are otherwise inaccessible.
Their system allows companies seeking financing an inexpensive alternative to an IPO where they can be listed in a central marketplace thereby reducing the cost of raising funds while speeding up investment time frames. A company seeking financing determines how many investors it would like to show its' business plan to and 504 Bank attempts to meet their ceiling. For verification, the company seeking financing receives the email address of each investor that downloads their business plan.
International Accumulation of Foreign Reserve currencies
This material and any views expressed herein are provided for information purposes only and should not be construed in any way as a prospectus or offer. Please contact the company concerned for information of any business opportunity or specific program. Before investing in any business, you must obtain, read and examine thoroughly its disclosure document or offering memorandum.
MONEY FINDER
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