Funding for early-stage venture Funding for the early stages - is the provision of initial capital entrepreneur whose business is on the level of ideas. Therefore, the funds raised are used for product development and marketing of the primary. When an engine is running - is the study of the market, there is a development of the product, create a key management team, we can make the next round of funding necessary to hire skilled managers, purchasing additional equipment and start a serious marketing campaign. The funding provided in the early stages of company development, enables the latter to begin mass production of the product and go with him to the market.
Venture capital funds that provide seed capital to invest in companies that are in the early stages of its development. Investors know that only 20% of the invested companies survive to the next round of funding. The second round is already another investment fund or funds of the syndicate, who takes over the leadership of the process.
As compensation for the higher risk fund seed capital always requires a very high percentage of its participation in the company conducts several rounds of funding, and appoints managers and employees of the company at its discretion. The first round of financing allows the company based on the stage of the expansion, to begin full-scale production of the product, to organize the sale and enter the market. The second round allows the company, which already sells its product to hire an additional number of new employees - specialists in marketing, sales, and engineers. Since many of the expansion stage are not yet fully profitable, they often use the "infusion" of capital to cover the negative cash flow.
The third round or mezzanine financing allows for a significant expansion of the company, including the increase of production space, additional market research, new product development. At this stage, the company is already break even or make a profit.
The initial public offering on the stock exchange (IPO) - the last stage of development of a successful venture capital firm. When Venture Company places its shares on the stock exchange - is the "public", she gets all the profit on that investment previously invested in the project. Income generation venture capital investors Traditional ways of generating income investors: 1.Dividenty At a certain time after the receipt of financing entity pays dividends to investors. Dividends are usually distributed among the investors in proportion to the invested capital.
The size of dividends is usually determined by the Board of Directors of the company, but subject to the limitation amount. 2. The output of the investor of the project according to the schedule approved in advance At a certain time after the receipt of funding now, investors have the right to return the invested funds through the sale of its shares to their original owner, but to the extent that cash at the company were in the right amount. In the case where several investors want to withdraw from the project, it is proportional to the capital invested, and in accordance with a predefined schedule. 3. Redemption controlling stake in the company from investors according to pre-established schedule At a certain time after the investment company has the right to buy at a fixed price of the company's shares owned by the investor.
Redemption is made on a pre-approved schedule. 4. Mergers, acquisitions, initial public offering on the stock exchange In the case of a merger, acquisition or IPO is impossible to predict what will be the income of the investor. The implication is that any of these actions will be committed for the benefit of shareholders. 5. The convertible loan An alternative to a direct investment is a loan issued to the investor.
This determines the interest on loans with regular payments at a set time during the term of the loan. The investor has the option to swap the interest rate on a loan for a pre-specified period of time (usually much shorter than the time of the loan). History of the development and characteristics of venture capital investment in the world Venture capital (born Venture Capital) - equity investors to help the financing of new, growing or struggling for a place in the market of enterprises and firms, and therefore carries a high or relatively high-risk, long-term investments in risky securities or enterprises, waiting for high profits. Venture capital is usually associated with innovative companies.
Venture capital - capital that is used for direct private investment, which is usually provided by outside investors for financing of new, growing companies or companies on the verge of bankruptcy. Venture capital investments - it is usually risky investments that have a yield above average. Also, they are a tool to get a stake in the ownership of the company.
Venture capitalist - a person who carries out such investments. Venture Fund - a mechanism to form a common investment fund (usually partnerships) to finance capital investment, mainly third-party investors in enterprises that conventional capital markets and bank loans are too risky.