...Financing Excerpts from Angel Investor Study Venture Support Systems Project: Angel Investors MIT Entrepreneurship Center Release 1.1 February 2000 The Venture Support Systems (VSS) Project is managed by a team at MIT and HBS. It was funded by a generous donation from Ronald A. Kurtz (MIT 1954) and David Kurtz (HBS 1992). Other reports from the VSS Project include cases, teaching notes and monographs. This report was prepared by Lucinda Linde (Marlin Capital) and Alok Prasad (Pittiglio, Rabin, Todd & McGrath) under the direction of Kenneth P. Morse and Matthew Utterback of the MIT Sloan School and Howard Stevenson and Michael Roberts, of the Harvard Business School. �2000 MIT Entrepreneurship Center Executive Summary Angel investors are an important and growing source of financing for the start-up and initial growth phases of technology ventures. This study focused on high net worth angel investors with entrepreneurial backgrounds. Many of these angels invest in first time entrepreneurs before the entrepreneurs secure venture capital financing. Besides earning a strong return on their investment, these experienced angels are motivated to “give back” to the community which helped make them successful. Very little published data is available on angel investing and little research has been done on the experienced angel investor. It may be valuable for first time entrepreneurs, venture capitalists, regulators and other members of the venture community to understand...
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...Difference between angel investor and venture capitalists Financing Options for Entrepreneurial Ventures: 1. Internal Funding a. Founder, Family and Friends (3Fs) b. Bootstrapping : internally generated retained earnings, credit cards, home mortgages, and customer advances c. Business Alliance: forming “cooperative agreements” with another firm to generate revenues and reduce costs 2. External Funding a. Angels: are successful business people who invest their own money. There are over 250 angels groups * Involved in the early stage of entrepreneurial ventures * Invest in technologies or in business in the areas that are known to them * Capital requirement of $50,000 to $250,000 * Sales potential of between $2 million and $20 million within 5 to 10 years * Invest alone or in angel organizations b. Venture Capitalists: are financial intermediaries, they take investors’ capital (not their own) and invest it directly into portfolio companies They utilized to fund the internal growth of companies and their primary goal is to maximize its financial return by exiting investments through sale or IPO. * Funding later stages firms * New emerging and middle-market private companies that will go public or merge within 4 to 7 years * Have $5 million to $200 million in sales with a billion-dollar potential, growing 25% per year, with gross margin 40% to 50% or more ...
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...beverage sector. Their unique idea of a microbrewery and fine dining restaurant stemmed from a law amendment of California in 1983 which allowed brewing and serving of beer in the same locale. They envisioned the concept of providing high quality fine dining with outstanding service in an attractive ambiance featuring exceptional German-style lagers in on-site breweries. Their target market was the fairly sophisticated, yet not so young natives of Palo Alto as well as the Stanford University faculty, staff and graduate student body. Their unique idea came to realization in July 1988 after rigorously detailed planning pertaining to atmosphere, food selection and German-style brewery. The capital was raised by the contribution of five investors, (Dean’s family friend...
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...Contents 1 Venture Capital 4 2 Mechanics of raising equity capital 5 2.1 Equity financing for private companies – Sources for funding 5 2.1.1 Angel Investors 5 2.1.2 Venture Capital Firms 6 2.1.3 Institutional Investors 6 2.1.4 Corporate Investors 6 2.2 Outside Investors 6 2.3 Exiting an Investment in a Private Company 7 3 The process of start-up funding 8 3.1 Idea and co-founder stage 8 3.2 Family and friends stage 8 3.3 Seed or angel round 8 3.4 Venture Capital Round 8 4 The Initial Public Offering 10 4.1 Advantages and Disadvantages of Going Public 10 5 Key Elements for successful Entrepreneurship 11 6 The importance of Silicon Valley in the U.S. venture capital system 13 6.1 Venture Capital Investment in the U.S. 13 6.1.1 Venture Capital Investment since 2006 13 6.1.2 Investment by industry 13 6.1.3 Investment by regions 15 6.2 Evolution of Silicon Valley 15 6.3 Silicon Valley – an advanced high tech entrepreneurial habitat 16 6.4 The Power of Clustering 16 6.5 Features of an advanced high tech entrepreneurial habitat 16 6.6 The high-tech habitat: Value-added support 17 6.7 Impact of Stanford University on Silicon Valley 18 7 Entrepreneurship and Funding - Differences between Europe and U.S. 19 7.1 Venture Capital Investment in Austria and Europe 19 7.2 Development of Private Equity in Austria 20 7.3 Development of Private Equity in Europe 20 7.4 Venture Capital Investors in Europe...
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...Alternative Financing Options for Small Businesses FINANCING For more information, contact: The Business Link Toll-free: Fax: Email: Website: 1 800 272-9675 780 422-0055 (Edmonton) buslink@canadabusiness.ab.ca www.canadabusiness.ab.ca A Member of the Canada Business Network The Business Link is a not-for-profit organization supported by the Governments of Canada and Alberta, as well as other organizations committed to serving Alberta’s small business community. Disclaimer: The information presented in this document is intended as a guide only, and while thought to be accurate, is provided strictly "as is" and without warranty of any kind. The Business Link, its employees, its directors and members, its agents or contractors will not be liable to you for any damages, direct or indirect, or lost profits arising out of your use of information provided within this document, or information provided within The Business Link's websites. This material may be used, reproduced, stored or transmitted for non-commercial purposes; however, The Business Link's copyright is to be acknowledged. You may not use, reproduce, store or transmit this material for commercial purposes without prior written consent from The Business Link. © 2013 The Business Link ALTERNATIVE FINANCING OPTIONS FOR SMALL BUSINESSES (07/2013) Content Content ........................................................................................................................ 1 Purpose...........................
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...apartment buildings. Either way we're still investing in apartment buildings, directly we own the real thing and indirectly have a financial claim on the real thing 3 Characteristics of Capital: 1) It is mobile - it can travel anywhere in the world 2) Sensitive to the environment - if you're in an area with high taxes you can move to an area with low taxes. If you're in an area with low interest rates, low returns you can move to an area with high interest rates, high returns to get a better yield 3) Scarce - you have so much of it • The only source of capital is savers. If somebody can't save, they have no investment potential • Savers become investors. Investors can be retail (like you and I investing our extra earnings), institutions (like pension funds, insurance companies) or foreign investors (like other investors in other countries investing their savings in our country) Users of Capital 1) Individuals use capital when they buy a house and need mortgage because they don't have all the money so they're borrowing...
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...page 4 Investment -------------------------------------------------------------------------------------- page 5 Working Capital problems ------------------------------------------------------------------- page 5 Management of trade receivable ------------------------------------------------------------- page 6 Management of trade inventory -------------------------------------------------------------- page 6 Operating cash cycle (OCC) ------------------------------------------------------------------ page 6 Evaluation of Ventura plc proposal --------------------------------------------------------- page 7 Evaluation for four alternative sources of external finance ------------------------------- page 7 Business angels --------------------------------------------------------------------------------- page 7 Government assistance ------------------------------------------------------------------------- page 8 Leasing listing ----------------------------------------------------------------------------------- page 8 Alternative investment market (AIM) -------------------------------------------------------- page 8 Conclusion...
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...About Venture Capital (VC) | Starting and growing a business always require capital. There are a number of alternative methods to fund growth. These include the owner or proprietor’s own capital, arranging debt finance, or seeking an equity partner, as is the case with private equity and venture capital. Private equity is a broad term that refers to any type of non-public ownership equity securities that are not listed on a public exchange. Private equity encompasses both early stage (venture capital) and later stage (buy-out, expansion) investing. In the broadest sense, it can also include mezzanine, fund of funds and secondary investing. Venture capital is a means of equity financing for rapidly-growing private companies. Finance may be required for the start-up, development/expansion or purchase of a company. Venture Capital firms invest funds on a professional basis, often focusing on a limited sector of specialization (eg. IT, infrastructure, health/life sciences, clean technology, etc.). The goal of venture capital is to build companies so that the shares become liquid (through IPO or acquisition) and provide a rate of return to the investors (in the form of cash or shares) that is consistent with the level of risk taken. With venture capital financing, the venture capitalist acquires an agreed proportion of the equity of the company in return for the funding. Equity finance offers the significant advantage of having no interest charges. It is "patient" capital...
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...large increase in loan default due to unemployment 2. The financial crisis that started in 2006 was magnified by which of the following: A. Public concern over the war in Afghanistan B. Consistently increasing oil and gas prices C. Ethical issues affecting high value investment D. Mortgage lenders securitizing large quantities of their loans 4. This subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to own, which firms' securities to buy, and how to be paid back in the form that the investor wishes. A. real markets B. investments C. financial management D. none of these 5. This subarea of finance looks at firm decisions in acquiring and utilizing cash received from investors or from retained earnings. A. investments B. financial management C. treasury management D. none of these 7. This subarea of finance helps facilitate the capital flows between investors and companies. A. investments B. financial management C. treasury management D. financial institutions and markets 10. This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow. A. investment B. financial asset C. real asset D. financial markets 12. Which of the following managers would NOT use finance? A. Operational managers B. Marketing managers C. Human resource managers D. All of these would use finance 15. This type of business organization is relatively easy to start...
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...is called a(n): A. entrepreneur B. venture capitalist C. capitalistic adventurer D. franchiser ------------------------------------------------- E. ultra capitalist 2. Andy Yocom saw prime advertising space on the flags on the golf course. He reasoned that any marketing messages would get prominent attention if they were placed on the flags since golfers focus on them when they take their shots. As a result Yocom used his own initiative and money to start Invision Golf Group Inc. Yocom is an example of a(n): A. entrepreneur B. venture capitalist C. capitalistic adventurer D. franchiser ------------------------------------------------- E. ultra capitalist 3. Jon P. Farmer is the founder of Kolopua Hawaii LLC, a company that markets Pure Hawaiian Air. Bottles of Pure Hawaiian Air contain air that smells like the floral bouquet that greets tourists as they get off the plane in Hawaii. Retailing for about $5 apiece, the bottles are sold at gift shops in Hawaii, as well as to travel agents nationwide who give them to clients. As a(n) _____, Farmer's annual income exceeds $100,000 annually. A. venture capitalist B. franchisee C. franchisor D. entrepreneur ------------------------------------------------- E. financier 4. An entrepreneur is a person who _____ a business. A. finances B. manages C. locates D. owns and operates ------------------------------------------------- E. works for 5. The difference between the small business owner and the entrepreneur...
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... • Angel Investors • Venture Capital Firms • InsNtuNonal Investors • Corporate Investors 14.1 Equity Financing for Private Companies • Angel Investors: – Individual investors who buy equity in small private firms – The first round of outside private equity financing is oSen obtained from angels 14.1 Equity Financing for Private Companies • Venture Capital Firms: – Specialize in raising money to invest in the private equity of young firms – In return, venture capitalists oSen demand a great deal of control of the company Figure 14.1 Most AcNve U.S. Venture Capital Firms in 2009 (by Number of Deals Completed Figure 14.2 Venture Capital Funding in the United States 14.1 Equity Financing for Private Companies • InsNtuNonal Investors: – Pension funds, insurance companies, endowments, and foundaNons • May invest directly • May invest indirectly by becoming limited partners in venture capital...
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...Chapter 15 Venture Capital: * Private financing for relatively new businesses (often high-risk) in exchange for stock. * Individual venture capitalists invest their own money; so-called “angels” are usually individual investors, but they tend to specialize in smaller deals. To limit their risk, venture capitalists generally provide financing in stages. First-stage financing might be enough to get a prototype built and a manufacturing plan completed. Second-stage financing might be a major investment needed to begin manufacturing, marketing, and distribution. Mezzanine level financing refers to the level just above the ground floor. * Private equity is often used to label the rapidly growing area of equity financing for nonpublic companies. * Usually entails some hands-on guidance * The ultimate goal is usually to take the company public and the VC will benefit from the capital raised in the IPO * Many VC firms are formed from a group of investors that pool capital and then have partners in the firm decide which companies will receive financing Choosing a Venture Capitalist * Financial strength is important * Style is important * References are important * Contacts are important * Exit strategy is important The Public Issue * Public Issue—the creation and sale of securities, which are intended to be traded on the public markets * All companies on the TSE(Toronto Stock Exchange) come under the Ontario Securities Commission’s...
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...Letter of Transmittal March 22, 2016 Dr. Salehuddin Ahmed Faculty Masters of Business Administration BRAC University Subject: Submission of project paper on “Venture Capital Firm” Dear Sir, We are pleased to present our project paper of startup of a “Venture Capital Firm” after a long and rigorous teamwork. We have tried to integrate the knowledge that you have imparted upon us into various topics in the report. This report consists of the overview of our venture capital firm “SEED”.. We hope that you would be kind enough to have your insight in our paper .We will be glad to answer any of your queries regarding the study and report. Sincerely Yours Acknowledgement At first we would like to express our gratitude to Almighty Allah who makes us able to prepare this project paper with good health and sound mind. Then we would like to express our deepest gratitude and warmest appreciation to our research supervisor Dr. Salehuddin Ahmed, whose assistance and guidance was outstanding for the successful completion of this project paper. Without his help, it was impossible for us to complete this project paper. His excellent method of guiding helped us to understand this critical title easily. We also thanked him for kindly assigning us such a nice and significant title which we are always supposed to remember gratefully. Table of Content Section | Page No. | 1. Background and justification of the project | | 2. Objectives of the...
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...Content Introduction 2 Chapter 1: Theoretical aspect of venture financing of innovational projects 5 1.1 The economic essence of venture financing of innovational projects 5 1.2 Main Stages of Venture Financing 11 1.3 The organization of the process of venture financing of innovational projects 14 Chapter 2: Venture financing abroad and its development in Russia 23 2.1. Experience of developed countries in the field of venture financing 23 2.2. Current situation and peculiarities of the development of venture capital industry in Russia 28 2.3 The role of state in the system of Russian venture financing 34 Chapter 3: Analysis of venture financing company and recommendations for it development on the example of JSC "Solar-Optic" 45 3.1. Analysis of key financial and economic indicators of JSC "Solar-Optic Ltd" 45 3.2. Analysis of the process of financing of Innovation Company of JSC "Solar-Optic” 55 3.3. Analysis of the sources of funding and recommendations for attraction of potential investor 62 Conclusion 71 Used Material 76 Appendixes 80 Introduction Diversification of the economy, and shift from primary industries to high-tech industry, is not only one of the major challenges facing the Russian economy at that moment, but also largely depends on the pace of development of technology-based entrepreneurship. World experience shows that small and medium-sized innovative companies as economic actors most motivated and flexible in achieving output...
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...e-Journal VENTURE CAPITAL IN INDIA D. P. WARNE*; PINKI INSAN** *Chaudhary Devi Lal University, Sirsa, Haryana-125055. **Shah Satnam Ji P.G. Girls College, Sirsa, Haryana- 125055. ABSTRACT India is the largest democracy on the planet and second most populous country in the world. Its extraordinary history is intimately tied to its geography. A meeting ground between the East and the West, it has been invader’s paradise. In the last one and half decades, India has proved itself as a destination for Information Technology (IT) and Business Process Outsourcing (BPO). India is also fast emerging as a major center for cutting-edge research and development (R&D) projects for global multinational companies. Lot of activities are happening in India in various sectors such as IT, BPO, Knowledge Process Outsourcing (KPO), Semiconductors, Biotechnology, Textiles, Manufacturing, and Engineering recently. This study is an attempt to explore the trends and developments in Venture Capital financing in India through an in‐depth analysis of these investments over the last 5 years (2005‐2009). INTRODUCTION The Venture capital sector is the most vibrant industry in the financial market today. Venture capital is money provided by professionals who invest alongside management in young, rapidly growing companies that have the potential to develop into significant economic contributors. Venture capital is an important source of equity for start-up companies. Venture capital can be visualized...
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