AngelInvestorsForum.com

magic e


venture Capital/Angel Finance required for a service based project in India ? Unique first time venture, High risk, High Gain type

Jeya Lakshmi




China being a developing and transitioning country, its venture capital market has some special characteristics.

1. China’s venture capital practices lag behind the international norm
The high-tech enterprises in China, relying on various sources of capital, have undergone a difficult process of development. Although China has quite a few high-caliber entrepreneurs in the high-tech industry, a large number of these companies (16,000 in Beijing while 72,000 nationwide) are run by inexperienced individuals.

a) Serious information asymmetry
First, there exists an information asymmetry between the managers of high-tech companies and the outside investors.
Second, there exists an information asymmetry between high-tech companies and venture capital firms. By international practice, both parties should be honest with each other and exchange information openly. After all, the venture capital investors add value by using their management and technological expertise to improve the company’s performance.

b) Serious exclusionism
High-tech companies in China, particularly those run by the locals, have a tendency to refuse to cooperate with outside investors.

c) High cost of investment
Chinese high-tech companies, particularly those run by the locals, are mostly under the control of couples or families. These ownership structures make it difficult and costly to follow the customary practice for venture capital investments, under which venture capitalists receive a substantial portion of ownership and control in the companies

2. Company managers, rather than venture capital investors, retain majority control
It is a common practice for the managers of some high-tech companies in China to demand for majority holding in cooperation with venture capital firms. There may be many explanations for such behavior, yet the primary reason lies in the influence of traditional Chinese thinking. This thinking is based on the belief that one will lose control over the company without majority holding or a leadership role in the company.

3. China lacks an infrastructure of service professionals to support venture capital firms
The growth of venture capital involves not only high-tech companies and venture capital firms, but also intermediary agencies such as law firms, accounting firms and assessment centers. Unfortunately, China still lacks agencies that offer proper services to the venture capital community.

At present, venture capital firms in China have to shoulder the multiple tasks of seeking for investment projects, assessing the projects, avoiding legal risks, planning the finances of invested companies and helping the portfolio company to list on the stock market.

4. The legal framework for venture capital investments is inadequate
Although China has set the national strategy of “revitalizing the country through science and education,” it has yet to set up a legal framework in support of venture capital investments. The Chinese venture capital community has been growing in the absence of proper protection by law.

5. The Chinese capital markets provides inadequate exit channels for venture capital investments
The returns of a venture capital firm do not depend on yearly dividends but on the acquisition or the initial public offering of its invested companies. Such liquidity events require mature capital markets, which China lacks at present.

venture capital financing has given rise to a dynamic system of modern financial products and services by introducing a series of innovations. Please visit online http://www.dynastyresources.net in NewYork city.

Dave Lavinsky




Entrepreneurs and companies who are seeking venture capital often negotiate with one or more venture capital firms on a number of important issues. These issues include the amount of capital to be raised, the investment terms, etc. The document which summarizes these terms is known as a “term sheet.”

The term sheet is similar to a letter of intent, that is, it is a nonbinding summary of the key points of the transaction. These points are later covered in detail in the Stock Purchase Agreement and related agreements signed at the time of execution of the transaction.

The value of the abbreviated term sheet format is that it speeds up the process of consummating a transaction. Specifically, it allows the parties to agree on the general terms of the transaction rather than having to debate less important details. In addition, because it is not binding, it allows the parties to take their discussions to the next level without the danger of committing too much. Note, however, that some parts of a term sheet may be binding. Typically the binding aspects only refer to confidentiality and disclosure issues.

Venture capital firms, and not the companies seeking capital, typically prepare the term sheet to include the terms under which they are willing to invest their capital. Alternatively, when seeking capital from angel investors, firms typically create their own term sheets for the angels to review. This fact tells a bit about the balance of power in an investment transaction. Venture capital firms are often more sophisticated and have more power than the companies seeking capital. Alternatively, angel investors are typically less sophisticated and have less power, and are more prone to consider the investment terms as laid out by the company seeking capital.

Getting to a term sheet is a key milestone in the capital raising process. Although not all term sheets result in a transaction, the term sheet shows that both parties are legitimately interested in executing a transaction. It is then up to the investor and company to agree upon the details.

Michael Henry O. Smith




When you set up something unspecific with an unknown or a forgotten name with the aim to promote your industry, or have a plan that could yield you millions, then the next target is how to raise capital to fund it. Mind you, creating a potential theory with numerous source of income is just an insignificant percentage of the whole process.

Raising sufficient money for your investment requires a lot of technical plans. The first strategy is to access your cooperate body as a whole. Insure that your various executives are in good foam. Avoid bringing in friends and family members that are incompetent. Fill in your corporate executive positions with the most qualified professionals.

Another major area that requires proper inspection is your board of directors. How active are they? What are their merits in behaviors and formal activities like? They must have links that they intend to use generously in other to progressively move the company forward. These should be the ultimate qualities of your corporate body and board of directors because; it is the links in their portfolios and their personal values that you will use to generate viable and long term alliances and associates that will improve your company, after putting your business structure in good form.

Your listed board of directors must have a concrete deals that defines what each party has to contribute to the association. Do not make any assumption of leaving any thing to chance because this is a serious venture that you would not want to see collapsing down the road.

The diligent efforts you made to get the best corporate executives, with professionals and strategic members of board of directors, will earn you a huge success when the VC’s goes through the bio section of your business plan. The VC’s always look out for your ability to get the elite and specialized executive staffs with tested career that is yielding results with the previous business sectors they have being before.

When you have gotten these things in place, it only means that you are ready to set up a business plan. Look for a consultant that writers a first-class grade business plan and offers a corporate formatting and turn round service also. Let him go through your files and make some necessary corrections on them. In choosing the author of your business plan, you must do it carefully because the success of your company and ability to raise sufficient capital depends on it.

Having your company structured with your business plans in place, the next thing to do is distributing your business equity that defends you from charges of any kind thereby giving your financiers the comfort to know that you are ready for funding in case they decide to invest. You will need a private placement memorandum [PPM]. This is where the vital roll of your business plan author comes to play. He as an experienced author with absolute knowledge of your business plan will technically draft this document.

It is at this point that you become qualified to start meeting the business venture capital firms. Funding capital is always the last thing after all other processes have been completed. You can then go to the global venture capital market. Login to the internet and you will find many “Venture capital services” that has substantial contacts in the funding sector. They can also link you up with investors and equity companies that are looking for investment opportunities.

Kenneth Marks




Private equity is used to broadly group funds and investment companies that provide capital on a negotiated basis generally to private businesses and primarily in the form of equity (i.e. stock). This category of firms is a superset that includes venture capital, buyout-also called leveraged buyout (LBO)-mezzanine, and growth equity or expansion funds. The industry expertise, amount invested, transaction structure preference, and return expectations vary according to the mission of each.

Venture capital is one of the most misused financing terms, attempting to lump many perceived private investors into one category. In reality, very few companies receive funding from venture capitalists-not because they are not good companies, but primarily because they do not fit the funding model and objectives. One venture capitalist commented that his firm received hundreds of business plans a month, reviewed only a few of them, and invested in maybe one-and this was a large fund; this ratio of plan acceptance to plans submitted is common. Venture capital is primarily invested in young companies with significant growth potential. Industry focus is usually in technology or life sciences, though large investments have been made in recent years in certain types of service companies. Most venture investments fall into one of the following segments: