To be a Venture capitalists broker you need money, you need to be considered an accredited investor, and you must know the risk involved. So let’s cut to the chase, how much money do you need to invest in VC? The government declares that you need a net worth of $1 million or a $200,000 annual income to be worthy of risking your capital in start-ups.
Simply put, we took money out of the equation, if you have the money, you’re an accredited investor, then let’s see if the risks are worth it to you to invest in VC. There are a number of risks associated with VC investments. To get a clearer understanding seek a professional’s advice, like that of Efraim Landa. VC investment risks are as followed: Read the rest of this entry
Venture capitalists usually specialize in industries such as computer, biotechnology and the communications industries such as high technology companies including software, biotechnology, medical devices, media and entertainment, wireless communications, Internet, and networking startups. In the last five years, there is a big commitment from VC firms towards clean technology startups which include renewable energy, environmental and sustainability technologies and power management.
As technology progresses VC firms can benefit on the growth of a great startup company, and the company can get funding needed with the support from VC firms. This creates a win/win solution for each because many companies in the technology industry need more funding then most business loans provide. A few examples of companies that got their start from Venture Capital funding are Digital Equipment Corporation, Apple Inc., Genentech. These companies received funding as far back as the 1980’s. Knowing this, Venture Capital is nothing new and here to stay. Read the rest of this entry
Whether Private Equity investing has a positive effect or a negative effect on the economy is a big topic of debate right now. There are many who can point out all the positives that occur in the economic structure due to private equity; and there are others who can offer examples of ways the economy has been harmed because of this type of investing.
Positive Effects of Private Equity
If you are working at a very disorganized company which is looking at going belly up, having a private equity firm come in and save it may just save your job. For those whose jobs are saved it certainly looks like a good impact on at least the local economy. Many also suppose that companies which are run privately will perform better than those which are publically owned; largely due to the higher level of accountability which is required. When a Private Equity group or firm invests in a company they will sit on the board as a general rule to ensure that the company upholds a high ethical standard. Many officials cannot let some things slide by when your investors are sitting on the board watching every move.
When a private equity firm invests in a company it is usually one in which they already have a high level of expertise and experience in handling. They are more likely to be able to bring in consultants which can enhance the business and help it be more productive or efficient. They have a vested interest and want a good return for themselves as well as their shareholders. These are also long-term investment teams such as those at Effi Enterprises. They are in it for the long haul and are determined to gain long term profitability. The type of patience required can help them stay with a company for 4 or 5 years or longer until there are higher returns in sight. Private Equity can be very good for every size investor.
When greed gets involved, Private Equity can get ugly. Many times a private equity firm can be bad for a company especially if they try to urge the company to incur much debt. This can be disastrous for an already struggling company. Handling funds this way can be very risky especially for smaller companies.
Another negative effect a private equity firm can have is if they lay of lots of workers trying to make the company more efficient. This does not happen a lot – but it does happen and it yields a negative effect on the economy. And if there are negative effects you will likely never hear about it unless there is something that goes terribly wrong. Private companies do not have to share financial reports; public companies do and must remain very transparent.
Private Equity is said to have created a group of super wealthy people. And the troubling part to many is that they do not pay taxes on this income like most of us do. This is because when money is made through investing you get a much lower tax rate called long term capital gains. A lot of times managers are paid by being allotted a certain percentage from set profits. Since their income comes from a type of interest it is considered investment monies; and therefore taxed at the lower rates.
What do you think?
Is private equity hard on the economy? It seems it works with a small or struggling business to help them become more established and this can be a great boost to the economy and save many jobs. Whether or not it is bad for a particular company may be determined by the firm’s perspective and procedures for improving the company they are investing in. But saving a company and keeping it afloat in a troubled economy is certainly a good thing for all persons involved.
There is a vast difference between vulture capital and private equity. But before the details are given we should look at a brief explanation of vulture capital. The term vulture capital is a slang term that is related to venture capital only in a negative connotation. Venture capital is a form of funding for businesses and especially an entrepreneur. When a business is just getting started a company such as Effi Enterprises will become a funding source so that the business has a greater chance of growing. Usually this is in exchange for a percentage of the company’s profits. The term vulture capital is when funds are placed into a business for the purpose of slowly squeezing the life out of the business. A vulture capitalist will have a primary goal of eventually forcing the company out of business and then selling it for a profit. In pre-Reagan days this was called a leveraged buy outs. However, recently some have tried to say that private equity and vulture capital are the same thing.
Different Investment Purposes
Private equity is an investment into a company. Generally, this investment is done through a private equity firm, an angel investor or a venture capital firm. No matter what category the investment falls into, each company will have its own investment strategies, preferences and ways of setting goals. The main purpose is to provide the funds to help the targeted company continue with expansions, develop new products or they may be used to entirely restructure the company’s management or operation.
Some say that private equity is “no better” than the leveraged buyout. However, in a leveraged buyout the vulture capitalist will buy majority control of a firm or business. Usually an investment in made into a business via angel investors or venture capital firms, not for gaining any control, but for the opportunity of investing in emerging companies or entrepreneurship. They will invest in a company, help get it established and up on its feet in exchange for a portion of its profits further down the road.
Private equity and vulture capital are both ways to pour funding into a business. The main difference is that private equity (and real venture capital) will also be willing to pour time and expertise into the company to help it succeed and grow; whereas the vulture capitalist will have the goal of purchasing the majority of the controlling shares in a company for the purpose of liquidation. They both are looking for a profitable return down the road. However, the private equity firm will obtain their profits from helping get the business established until there is a solid profitability from which they can draw. The vulture capitalist is looking to profit from the yields of a liquidated business which is going under. Most investors are looking to put money into a company like “seed” money in hopes that the company will benefit from the investment and be able to work to provide long lasting profits. Vulture capitalists will try to squeeze everything out of a business and the efforts are not at all aimed at the success of a business; but rather at gaining from the loss. Many Vulture capitalists will actually force businesses to go further into debt or incur new loans until their only choice is to file bankruptcy. At this time the Vulture capitalist will profit from the forced liquidation.
Are they Necessary?
In the real business world there is a place for both the private investor and the true Vulture capitalist. Each one of them can play a major role that helps strengthen the economy. Vulture capitalist can have a positive effect if they give a failing business a way to get out gracefully.
Angel Investing is a type of private investing in which funds are invested into start-up companies. These are much smaller amounts than Venture Capital funds which can range into the billions of dollars. Generally, angel investors invest between 25 and 50 thousand dollars into a deal. Efraim Landa has helped entrepreneurs for many years now by helping them locate this type of funding for an early stage company. One of the latest trends in angel investing is where a group of those interested in private investing pool their resources and capital together to invest in start-up companies. Angel investors look for investing opportunities which can yield large returns in terms of a 10 to 20 time potential return.
Benefits of Angel Investing
As a general rule, angel investors may choose to focus more on local companies. This is not always the case, however many prefer to place these types of investment funds into a local company because this makes it easier for them to become more involved with the company. Companies like Effi Enterprises which offer these types of funding for a company will generally become involved in some capacity with the board of directors. This is so that the company can benefit from their years of business experience as well as learn from their particular areas of expertise. This helps provide stability to the company that they are investing their funds in. It is a protective move for the investor; but also helps the company become better established and solid.
How are companies selected?
Selecting companies to invest in can be an arduous task. It can take a long time for an investor to decide which of the companies will benefit most from the invested funds. Investors are very selective and many times weed out 80 to 90 percent of companies who are applying simply because the company does not meet their criteria. The other 10 percent or so can then be narrowed down to just a company or two that Angel Investors will contribute to. For this reason it is very important that the entrepreneur present a thorough business plan when requesting this or any type of funding. Once the companies are selected a thorough analysis will be made of the company. This is a lengthy process as the business must be evaluated from every possible aspect.
Investing for Returns
Angel investors will contribute to a business that they feel they can get a substantial return from. This means that it is a very tough process. The asking company must be able to establish and explain details on items such as liquidation preferences, anti-dilution clauses and board seats. Angel investors do not want to dump money into a company and walk away hoping it will turn into profits. They are making and investment of their money along with their time to help the company succeed. When the company succeeds, so will the investor. In our present economic climate it can take a longer period of time to realize substantial profits from an angel investment. So they will want to invest in a company which has lower levels of risks. Those who offer venture capital will not require as much from a business, and they will not be as involved in the business once the investment has been made.
Angels who invest in your company will take an active part in helping it succeed. Angel investing is not like a loan any other form of debt financing; it actually gives another party ownership interest in the company. An angel investor will be looking for a company with a huge potential for growth and profits. This will be an entrepreneur who has plans of expanding their businesses. Generally this type of investor will take equity in your company and then when it is sold or if it grows to the point of going public they will take their gain.
Before a company is publicly traded on a stock exchange it remains a private equity company. Effi Enterprises is experienced in private equity financing for start-up companies and emerging companies who have not yet gone public. Even though private equity investments can be contributed to any type of company, Efraim Landa and Effi Enterprises offer private equity investments specifically to companies which are involved with developing and implementing of high tech medical equipment.
Private Equity Investing
Sometimes an individual may be a private equity investor, but generally a private equity fund is set up by a group of investors who all contribute to a private equity fund. Once the fund is established it is used to support the investment in the company. Most generally, a private equity fund is used to support a variety of investments which are used to purchase the controlling interest in multiple companies. Each contributing investor receives portions of the profit that is generated from the investments. The portion of profit each one receives is proportional to the size of their investment into the fund. Effi Enterprises contributes private equity investments in start-up and emerging medical companies.
Strategies for Investing
There is a considerable amount of strategy that is involved in making investments of this kind. Basically there are three types of strategies. One of the most common is to raise venture capital which is funds that are invested in a startup company that has a great potential and a high probability of being successful. The goal of this type of private investing is that the company will become profitable enough to eventually go public with its investing possibilities. A second type of private investing is growth capital which is invested in a more established business with the intent of helping it expand its services. And the third type of private investing is where several investors put funds together to implement a Leveraged Buyout (LBO). This is a purchase of a company that is either losing money or is underfunded. Effi Enterprises is a private investor in companies and they can also offer their expertise in the area of counseling companies on their available options.
Private Equity Investing and its Advantages
The main advantage for those who engage in private equity investing is that those who contribute are directly involved in the control of the company. They do not have to please any shareholders so they don’t have to worry about any other outside interests. Nor do they have to justify their decisions to another party. This allows the company to concentrate on their long term productivity and a more gradual build up of profits. This aspect can be advantageous to the company too. And investors are more likely to enjoy larger dividends when the company expands to the point of going public with their investments. Private equity investors earn money through their investment in private companies. And then the company benefits from the investors experience and expertise such as Effi Enterprises who can contribute business savvy which can help the company succeed.
Private equity financing is where funds are made available to private companies over the long term. This can be accredited investors or institutional investors which are providing funds to a company which is either struggling or it can be in the form of a buy-out. Generally it is to help generate finances for a growing company which otherwise does not have enough profit to pursue expansions and growth on their own. These funds can provide the financial stability that a company needs to have while they are developing and progressing in the business world. Many times private equity firms, such as Effi Enterprises, come together to fund a leveraged buyout. (LBO) Through this type of funding companies can make larger purchases that might not otherwise be possible. The private equity firms then provide support to help improve the company’s financial circumstances in the hope that the company can be resold to another firm or be cashed out through an IPO.
Effi Enterprises is a consulting business which offers private equity financing to companies which are involved in the development and implementation of high tech medical equipment. They are a private equity firm which provides financing for emerging businesses in this particular business sector. Different firms may participate in particular types of companies and they specialize in helping increase the company’s valuation by assisting in the managerial aspects of the company. Effi Enterprises and other such businesses which provide private equity financing help a company refocus strategies, reduce cost structures, and strengthen the company’s leadership. Sometimes these strategies may mean that some parts of the company are sold off so that other parts can thrive. Firms such as Effi Enterprises can provide financial backing through private equity financing and business expertise to help ensure the company’s growth and success.
A real-life example of how private equity financing works is the Warner Music Group. The music label was purchased by a group of private investors. They purchased the company for $2.6 billion. Through much planning and managerial changes they corporately made operational cuts and just about one year later the company was able to go public and its market cap was over $3 billion. The interaction increased the company’s valuation as well as provided the private equity investors a decent return.
One thing to remember about private equity financing options is that it is not always meant to be a quick fix. It is a way to provide financial stability for a length of time. The contributors function in a managerial capacity which offers the companies a wealth of business expertise. One of the areas that companies such as Effi Enterprises provide when engaged in private equity financing is hands-on managerial experience and leadership. They can bring many useful business and marketing strategies to the table which can help increase the valuation of the company as well as provide funding for expansion and growth. They can offer advice on divestiture strategies and prepare financial projections and direction for the company. While the funding provided in private equity financing is beneficial to the establishment and growth of a company the business expertise from interested investors can be invaluable.
Venture Capital is a source of funding for businesses which are just getting started. Investors provide funding for businesses that have a high growth potential. Efraim Landa is an expert at helping emerging companies locate sources for venture capital. As an entrepreneur, he understands the difficulties involved in getting a business off the ground. The company he founded is designed for the purpose of helping such companies. Included in their area of expertise in Venture Capital they include managerial as well as technical counsel.
Starting a business will take money this is certain. Office space, furniture, various types of office equipment and supplies and money for hiring employees are all some of the initial expenditures a new business should expect. There are some different ways to obtain the money for the many needs of a new business. Of course one can use resources such as personal savings or second mortgages. Bootstrapping is a common way to fund a business. This method uses a small investment to get started and then all profit goes back into the growth of the business. This method works for a business or industry where there are minimal start-up expenses and no additional employees are needed. And of course the traditional bank loan is possible. However, because each business has individual needs these options are not always the wisest or the best choice. There are certain limitations associated with each of these choices; unless of course the entrepreneur is already very wealthy.
Venture Capital is another way to meet the financial needs that are associated with starting a business. This can be a means of obtaining large quantities of finances which can help a business with start-up expenses especially for the fast growing business. Investing firms provide an investment in the business and in return they will receive a percentage of the generated profits. Generally the company who invests in the emerging company will also participate on the executive level such as taking a seat on the board of directors. This allows them to have a role in the decision making progress. For the growing company this type of experience represented on this level can be invaluable and help ensure the success of the business.
How VC Works
Before any investments are made into a company there must be a business plan in place. The business plan will carefully lay out how the business is to be run, how it will make money and how fast it is expected to grow. This is presented to the interested investors who will contemplate if the business seems worth the investment. If the VC company feels like it is a worthwhile cause they usually offer a round of money called seed money. The funding may occur in 3 or 4 rounds before the company goes public with investment options.
One major negotiating factor that is considered when an investment firm participates in VC is how much stock they will receive from the profits. This is how they choose a valuation for a company. It is basically how much they feel the company is worth. Before investment begins this is called the pre-money valuation. After the VC is received by the company the investing firm then generates the post-money valuation. The percentage by which these two values change will determine how much stock the VC firm will receive. Typically, this is somewhere between 10 and50 percent.