Venture capital

C. Role play I: Investing in start-ups

 Imagine that you are investment managers for a large financial institution such as a pension fund or an insurance company that has decided to invest up to 2% of its assets in start-up companies.

It will not be difficult to find companies in which to invest, because you regularly receive propositions from venture capital firms. But first, you want to establish a strategy. Which industries or industry sectors do you think you should invest in? Which industries have the most potential? Which industries or technologies probably present the fewest risks? If you are going to invest in companies in your own country, in which industries does it have expertise or a competitive advantage?

Choose three of the sectors listed. Prepare a short presentation of your strategy in small groups. Then change groups and explain your strategy to your colleague, and then present your decisions to the class.

 

Industry sectors and their production computer and video game technology DNA sequencing and genetic medicine fuel-efficient aeroplane (Br.E) or airplane (AmE) technology genetically modified food high-speed rail transport hybrid (petrol and electric battery) automobile technology microprocessors using nanotechnology mobile telephone technology nuclear energy nuclear medical imaging solar energy technology wind energy technology other?

      Writing

After presenting your ideas in class, write a 100-150 word summary of your group’s investment decisions.

 Role play II: Venture Capital and Entrepreneurial Management

Imagine you are a venture capitalist, and an entrepreneur approaches you with a pitch for a new business. He wants to create an online marketplace for chemicals used by researchers in labs at universities, businesses and government agencies. The website would operate like Amazon. But instead of linking buyers and sellers of books, compact discs and other consumer goods, it would link scientists with sellers of substances such as proteins and antibodies. In order to do it you need to evaluate the online chemical marketplace first. Would you invest?

D. Discuss the following issues:

- the essence of venture capital;

- advantages and disadvantages of obtaining venture capital;

- venture capital vs seed/risk capital;

- venture capitalists – basic characteristics;

- business angels – basic characteristics.

- stages of venture capital investing

VOCABULARY

accelerate v - ускорять, убыстрять

assess v - оценивать

associate n - компаньон, партнер, сторонник

assumption n - принятие на себя (ответственности по обязательствам другой стороны)

break-even n - безубыточность, самоокупаемость

commitments n / syn. pledges / syn. obligations / syn. liabilities обязательства

binding / syn. mutual  ~ обоюдные обязательства

business angel  / syn. angel investor бизнес-ангел, ангел бизнеса, деловой ангел

capital n - капитал

seed ~ семенной (начальный) капитал

cash n - наличные деньги

~ flow денежный поток, поток денежных средств

~ injection / syn. infusion денежное вливание

cash v - обналичивать чек (деньги)

~out обратить в наличные деньги (какой-л. актив путем привлечения кредита под его залог)

~ infusion / syn. injection – денежные вливания

constraint n - принуждение; давление

convince / syn. persuade v. - убеждать

convert into v - превращать

corporate capital - капитал компании

drawback n - недостаток, отрицательная сторона

due diligence - проверка благонадежности финансового состояния компании (перед покупкой её акций, слиянием с ней)

endowment n - дар, пожертвование

equity n - капитал компании Фактически состоит из средств обыкновенных акций (common stock), резервов и нераспределенной прибыли

~ stake контрольный пакет акций над управлением компании

expertise n- экспертные знания

extend v - предоставлять (кредит)

feasibility n - выполнимость, осуществимость

fiduciary [fɪ'dju:ʃɪərɪ] adj - основанный на доверии; порученный, доверенный

follow-on - доработка (модернизация) изделия в процессе эксплуатации

hands-on - 1. рисковое финансирование с активным участием инвестора непосредственно в осуществлении проекта; 2. практический опыт

hands-off - рисковое финансирование без активного участия инвестора непосредственно в осуществлении проекта

inventory n - материально-производственные запасы

leveraged buyout (LBO) - покупка контрольного пакета акций корпорации с помощью кредита

marketable securities - рыночные (легкореализуемые) ценные бумаги

modest ['mɔdɪst] adj - скромный, сдержанный, умеренный, ограниченный

overheads n - накладные расходы

pilot production / syn. trial production - опытное производство

pool v - объединять в общий фонд

~ money объединять деньги в общий фонд

product development - развитие продукта , разработка и совершенствование продукции (процесс улучшения характеристик существующих видов продукции, а также разработки новых ее видов)

quoted / listed company - котируемая компания (акции которой зарегистрированы на фондовой бирже)

~ ant. unquoted / unlisted company некотирующаяся компания (ценные бумаги которой не котируются на бирже)

rate of return / syn. monetary return уровень доходности, доходность, рентабельность

receivables n - дебиторская задолженность

resentment n - негодование, возмущение

retain v - сохранять удерживать

retain v - держать; удерживать

returns / syn. yields n - доход, прибыль, выручка, поступления

revitalize v - реконструировать, восстанавливать

rival n - соперник

risk n - риск

~ capital рисковый капитал (капитал, который вложен в предприятия, характеризующиеся высокой степенью риска, но в потенциале способные принести высокий доход)

perceived ~ предполагаемый риск

to take ~ брать на себя риск

risk / syn. jeopardize v – рисковать

ROI (Return on Investment) - рентабельность инвестиций (капиталовложений)

revitalize v - воскрешать, восстанавливать, оживлять

secure v - гарантировать, обеспечивать

start-up (found a business) - 1) пуск, запуск (напр., проекта) ; начало (какой-л. деятельности); 2) стартап-компания (недавно созданная компания)

tax returns - налоговая декларация

thrive v - преуспевать, процветать

track record - послужной список, достижения

venture n - предприятие, дело (особенно связанное со значительным риском)

~ capital / syn. ‘risk capital’ / ‘unsecured risk financing’ / ‘development capital’ рисковый капитал, венчурный капитал

~ capital pool фонд венчурного капитала

~ capital firm фирма с венчурным капиталом

~capital investment венчурные капитальные инвестиции

~ capitalist венчурный капиталист (инвестор) 

~ capital funding венчурный фонд (фонд, формирующийся на средства частных и институциональных инвесторов, пенсионных фондов, страховых компаний, различных правительственных агентств, для поиска, нахождения, оценки и выбора очень рискованных, но потенциально прибыльных компаний для осуществления инвестиций).

Venture Capital Trust (VCT) - венчурный фонд (фонд, вкладывающий средства в малые высокорисковые компании, не котирующиеся на фондовых биржах, с целью увеличения их заемного капитала)

vested interest in smth.- закреплённое право, признанное право 2) сильная заинтересованность (в чём-л.)

viability n - жизнеспособность,

to bring forth - порождать, производить

to compensate for smth.- возмещать (убыток)

to get off the ground - начаться, сдвинуться с места; сдвинуться с мёртвой точки

GLOSSARY

Angel investor /business angel is an individual who provides capital to one or more startup companies. Unlike a partner, the angel investor is rarely involved in management. Angel investors can usually add value through their contacts and expertise.

Business plan - This is a legal document that business owner’s use in detailing their business idea(s) as well as their company’s overall financial objectives. Many investors heavily rely on an entrepreneur’s business plan when deciding to invest in a company.

Buyout is defined as the purchase of a company or a controlling interest of a corporation's shares or product line or some business. A leveraged buyout is accomplished with borrowed money or by issuing more stock.

Due diligence is the process of investigation and evaluation, performed by investors, into the details of a potential investment, such as an examination of operations and management and the verification of material facts.

Executive summary is a very important component of a company’s business plan. It concisely summarizes the proposed business idea(s) and the fundamental objectives of the company. Upon review, the investor(s) should have a precise understanding of the prospective company’s mission. The executive summary determines if the company is viable enough for investment.

Expansion stage company-generally refers to a company that is three years old or more. During this period of development, a company may already have been successful commercializing many of their products and services but may not generate desired profit.  An enterprise that is in its expansion stage may resort to seeking additional sources of capital to minimize the risk of failure.

First Stage Capital is the money provided to entrepreneur who has a proven product, to start commercial production and marketing, not covering market expansion, de-risking, acquisition costs.

Follow-On is a subsequent investment made by an investor who has made a previous investment in the company, generally a later stage investment in comparison to the initial investment.

Leveraged Buy-out or LBO is a type of aggressive business practice whereby investors or a larger corporation utilizes borrowed funds (junk bonds, traditional bank loans, etc.) or debt to finance its acquisition. The high debt-to-equity ratio enables the investors to “buyout” a smaller company with very little cash. Leveraged buy-outs can be either friendly or hostile, depending on the negotiations made. The debt is secured by the assets of the business. In LBO, the acquiring company uses its own assets as collateral for the loan in hopes that the future cash flows will cover the loan payments.

Mezzanine Financing is a late-stage venture capital, usually the final round of financing prior to an IPO. Mezzanine Financing is for a company expecting to go public.

Return On Investment (ROI) or Rate of Return (ROR) or Rate of Profit. It is the amount of money that is gained in a past or existing investment.

Risk capital are funds made available for startup firms and small businesses with exceptional growth potential.

Second Stage Capital is the capital provided to expand marketing and meet growing working capital need of an enterprise that has commenced production but does not have positive cash flows sufficient to take care of its growing needs.

Seed Capital is the initial set of capital for newly-formed or start-up companies. It’s usually quite small because the venture is still in the idea or conceptual stage.

Startup is a new business venture in its earliest stage of development. This is the initial phase of a company’s development whereby a prospective business is currently developing new products and services which have not been fully tested and introduced to the public.

Third Stage Capital is the capital provided to an enterprise that has established commercial production and basic marketing set-up, typically for market expansion, acquisitions, product development, etc.

Track record is the past record of the accomplishments and failures of a person, business, etc.

Turnaround is the term used when the poor performance of a company or the business experiences a positive reversal.

Venture Capital is the money and resources made available to startup firms and small businesses with exceptional growth potential. Most venture capital money comes from an organized group of wealthy investors.

Venture Capital Firm is an investment company that invests its shareholders' money in startups and other risky but potentially very profitable ventures.

Venture capital funds pool and manage money from investors seeking private equity stakes in small and medium-size enterprises with strong growth potential.

Venture Capitalist is a term used of a group of high-net worth investors who invest in later stage companies.  Unlike angel investors who use their own personal money, venture capitalists pool money from different sources for their investments.