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Michael


Does a venture capital firm’s 2-5% management fee cover the overhead expenses of the VC’s office & staff or what does it cover? How much of this is given as salary to General Partners, Venture Partners, Principals, etc.? What are the typical cuts each gets? Thanks!

Low Jeremy




Venture capitalism is one of the things that keep business booming in the country. It is one of the ways that helps new businesses thrive and flourish. This is because, venture capitalists are forever looking for new and innovative ventures that can potentially yield big return on the long term. They are not much into businesses that are already flourishing but those that are just starting or those that are in need of restructuring.

What is venture capital?

This refers to the money that a venture capitalist gives to a business or venture in exchange for a stake in the company. Instead of loaning the money, venture capitalists invest in the business hoping that it will yield a great deal of money in the future. This means that whatever the future earnings and profits of the company, the venture capitalist has a share on it. The same goes with the loss.

Risky business

Venture capitalism is indeed a risky business but it has become the lifeblood of the industry as most start-up companies rely on these kinds of investments to keep their business going and to make their ideas come to life. Typically, people with great ideas and the know how to execute them go to venture capitalists for their capital. Because they are not yet bigwigs in the industry, these people do not have access to traditional capital resources such as banks and other financial institutions.

Venture capitalists on the other hand look for companies that are small and new but have a really promising future. This way, they bring in little cash and get millions in return when the company becomes a success. Usually, venture capitalists have a team of people that keep tabs on the goings on in the business community. Like a hawk, they look for companies that are vulnerable but have great potential for growth.

A venture capitalist can be a person or an organization. A individual venture capitalist will often select just a few prized investments that he or she will watch like a hawk. Venture capitalist firms, on the other hand, can command billions of dollars in earnings and investments, depending on their size and their area of influence. Some venture capitalists have investments all over the world. Some VCs, especially the big ones, also have affiliate banks that provide the cash flow. Some even have subsidiaries that use the money in other investments to keep it rolling.

PNAC~Penelope


(Please don’t make this question about Bush – Just Answer the question)

The 2008 presidential race is off and running. It is popular to bemoan the lack of qualified candidates in the race. I wholeheartedly disagree. Many of the candidates have much valued experience in business, military and government. In 1984, Mitt Romney founded Bain Capital, one of the nation’s most successful venture capital and investment companies. Bain Capital helped launch hundreds of companies on a successful course, including Staples and Domino’s Pizza. Like Rudy Giuliani who was mayor of New York City, Romney also has executive experience as Governor of Massachusetts. John McCain was an officer in the military and is the senior senator from Arizona serving since 1987. All three of the declared republican front runners have very thick resumes as you should when applying for the most powerful executive position known to man.
Imagine if the republican front runner was a new member of congress with no military, business or executive experience. People would rightly challenge his/her lack of credentials. Likewise, suppose the Democrat front runners were Barak Hussein Osama and Hillary Rodham Clinton.

Past Presidents;

Bush 2 – Executive experience as twice elected Governor of Texas. Business Experience. Military experience flying Jets in the Guard.

Clinton – Executive experience as Governor of Arkansas.

Bush 1 – Executive experience in Business and as head of the CIA. Served in WW2.

Reagan – Executive experience as Governor of California

Carter – Governor of Georgia. Military experience.

JFK had a thin resume but at least he served in the Military.

Hillary – ?

Obama – ?

Aazdak Alisimo




What is venture capital and how does it differ from other forms of equity procurement? The answer lies in an understanding of the relationship of risk and return in investing.

One of the key principles of investment is that the greater the risk, the greater the potential for high rate of return. This might be called the “no guts, no glory” theory. If you are looking for a very safe and secure investment, there are plenty to be found, but you can be reasonably sure that your rate of return will be low. These low return, but safe investments are designed for long term investment. Even a small rate of return will have some accumulated value far into the future. If you are looking to really make money on your investment, you must be willing to take risks. What is venture capital? It is capital that is invested in high risk, but potentially high return ventures.

Venture capital is considered a private equity source. This means that it is not made available by normal lending institutions such as banks. Rather it is equity, most often in the form of cash, that is made available to finance the start up of companies that have an innovative idea, but lack the capital and do not qualify for debt type of financing. In most cases, the venture capital is exchanged for an ownership interest in the new company. This is most commonly in the form of stock ownership.

The disadvantages of using venture capital as opposed to normal debt financing for start up costs include the fact that some ownership rights are given up and the cost of repayment is very high. The advantage of venture capital is that it is often the only way to launch the business. It is pretty much a safe assumption that if the people starting the high risk business were able to secure financing through normal channels at lower cost and without surrendering any ownership control, they would do so.

This explains why venture capital is used so often in companies introducing new technology. Software companies and the now infamous “dot com” companies were good examples of firms that sought venture capital. Their main assets were ideas rather than tangible and solid items that were more likely to act as collateral in the eyes of a banker. Yet, it is in emerging technology that the opportunities for tremendous profit lie and this is what attracts the private investor to venture capital.

In some cases, groups of individuals join together to create venture capital funds. The idea remains the same. The venture capital fund acts only as an entity to handle the investments of the group. Some venture capital funds make investments on behalf of third party investors, but the definition of venture capital remains unchanged. Venture capital is not restricted to start up either. In some cases, it is used for research projects or expansion of an existing company. Once again, these alternative uses do not alter the basic definition of venture capital. It is a private source of funding for high risk companies offering potentially large returns if successful.

natethenorsk


I’m starting a home-based life and health insurance brokerage and I’ll also offer wealth management services. My overhead will be low, but I want to invest some start-up capital in additional training for myself, as well as marketing my business. The main concern I have is that my grandpa invested $20k in my dad’s failed business over 20 years ago, and it’s made holiday gatherings very awkward. I plan on paying back the capital I need to start ($6500), but it may take 3 years or more if the business starts more slowly than I anticipate. 1) How should I go about requesting start-up funding?; and 2) If it’s granted, how should I set up the repayment arrangement? As a loan, or should I give the investor a stake in the company? What are the legal ramifications of the latter since he is not licensed to sell life and health insurance (is it considered sharing commission if he receives income from the business)?