Venture capital firms - Security Analysis and Investment Management

Venture capitalists (VCs) can be defined as investment companies or fund managers that give cash for part-ownership of your business. They favor high-growth, well-established companies likely to provide an average 30-40 percent annual return on their money. Venture capitalists take a structured careful approach to investing. Usually managing money or pooled funds on behalf of banks or high net worth individuals, they are not usually interested in small investments. Before they invest, you should be prepared for a very thorough investigation of you and your business Venture capitalists can add significant value to your business. This might be via strategy advice, industry knowledge and experience of taking products or services to commercialization through to helping with strategic alliances and international networks. They will work with you to ensure their investment is as successful as possible. And they will drive a hard bargain. Usually operating on a fixed time frame (often three to five years), VCs exit a business by one of the following:

  • selling their shares back to you (a buy-back deal)
  • selling their shares to another investor
  • selling when the whole company is bought by a larger company (a trade sale)
  • Helping list your company on the local stock exchange and the shares are then sold to the public (an Initial Public Offering, or IPO).

Corporate

Corporate investors are larger companies interested in buying you out, rather than in high interest rates or a percentage of the company. The most common investment exit strategy for venture capital firms is through a trade sale to a corporate investor. Often a multi-national, a corporate investor usuallylooks for synergies with their business, increased sales, a superior technology or exceptional staff. Unlike venture capitalists, corporate investors often buy companies for the long haul and don’t want to exit.


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