Chapter 15: venture capital and
IPO’s
1. Venture capital (VC)
What?
• Young firms often require capital to finance growth
• “Going public” is not an option for an “immature, untried” company
• Possible financing from bank and FFF already explored (FFF=friends, fools, family)
Venture capital
=Money invested to finance a new firm
- Since success of a new firm is highly dependent on the effort of the managers,
restrictions are placed on management by the venture capital company and funds are
usually dispersed in stages after a certain level of success is achieved
Who?
Sources of venture capital
• Angel investors
- Investors who finance companies in their earliest stages of growth
• Corporate venturers
- Corporations that offer venture assistance to finance young, promising companies
- Private equity investing
, - Investors who offer funds to finance firms that do not trade on public stock exchanges
such as the NYSE or NASDAQ
(the name venture capital/equity is reserved for new firms, private capital/equity is
more general)
- Use of (mutual) funds to pool money together from investors
How?
Steps to obtaining venture funding
• Prepare a business plan
• Look for potential investors and pitch your idea/plan to them
• Receive first-stage financing
• Receive subsequent staged financing
How? P 442
Crowdfunding
Read “Finance in practice” p. 444
• Crowdfunding is a more passive investment vs. VC investments:
o Seat on the Board of Directors?
o Expert advice?
o Influence on management?
Success rate?
o = low
IPO’s
1. Venture capital (VC)
What?
• Young firms often require capital to finance growth
• “Going public” is not an option for an “immature, untried” company
• Possible financing from bank and FFF already explored (FFF=friends, fools, family)
Venture capital
=Money invested to finance a new firm
- Since success of a new firm is highly dependent on the effort of the managers,
restrictions are placed on management by the venture capital company and funds are
usually dispersed in stages after a certain level of success is achieved
Who?
Sources of venture capital
• Angel investors
- Investors who finance companies in their earliest stages of growth
• Corporate venturers
- Corporations that offer venture assistance to finance young, promising companies
- Private equity investing
, - Investors who offer funds to finance firms that do not trade on public stock exchanges
such as the NYSE or NASDAQ
(the name venture capital/equity is reserved for new firms, private capital/equity is
more general)
- Use of (mutual) funds to pool money together from investors
How?
Steps to obtaining venture funding
• Prepare a business plan
• Look for potential investors and pitch your idea/plan to them
• Receive first-stage financing
• Receive subsequent staged financing
How? P 442
Crowdfunding
Read “Finance in practice” p. 444
• Crowdfunding is a more passive investment vs. VC investments:
o Seat on the Board of Directors?
o Expert advice?
o Influence on management?
Success rate?
o = low
