Venture Capital & Private Equity
Going deeper into what do investors want to see, their expectations and what you can expect as a project founder.
Recently I was asked to speak in a community of about 70 business owners to give them an introductory explanation about the Venture Capital world and I called it “Venture Capital 101 in Simple Terms.
In order to make it easy and entertaining for them, I put together a Powerpoint Slide show with lots of images and little text. Images always work best when you want to communicate in a powerful way and when you want your target audience to remember you.
Here in this blog post I show five images out of the slide show, so you can imagine how the talk went.
As I also wanted the audience to take something valuable from the talk, I added in a slide that would lay out in detail the ingredients of a “Perfect Package”.
It is what the Investors want to see, it’s the miraculous sauce, it’s what makes the difference between being rejected or receiving cash. As an inventor or entrepreneur looking towards Venture Capital investors you want to make sure that you accumulate as many advantages as you can on your side.
When you are doing business, it is always good to create a WIN-WIN situation.
Both parties will benefit from it and it is a favourable outcome for the contracting parties.
When dealing with Venture Capital or Private Equity, it is planned that the party bringing the capital brings the WIN to the owner/corporation that wants to expand their business and the owner/corporation is giving up a percentage of their company (equity) which is planned to become a WIN for the investors, as the company becomes profitable and becomes more valuable as time proceeds.
Personally I am looking to always look for a WIN-WIN solution in any business transaction that I am involved in. For your next VC or PE business deal, expansion plan for your corporation or roll out of your latest invention: Ask Wolfgang.
Mat 3:23 “Make a tree good and its fruit will be good, or make a tree bad and its fruit will be bad, for a tree is recognized by its fruit.”
So if you consider that we ourselves are like trees, who are recognized by our fruit – what does your fruit look like, what does my fruit look like? Some self introspection is always helpful, as we can get a deeper insight and revelation regarding what we are to do and what not to do.
John 15:16 “You did not choose me, but I chose you and appointed you so that you might go and bear fruit–fruit that will last–and so that whatever you ask in my name the Father will give you.”
John 15:16 reveals another key to us on our path to being successful in the Lord’s eyes. This scripture tells us that the fruit that He is interested in, is fruit that will last (eternal fruit). The end of the verse contains an awesome promise that is based upon the condition that we bear fruit that will last.
So what is fruit that will last?
Olive Branch Ministries expressed it very well in their article about fruit when they said:
“I want to have lasting fruit in my life, lasting fruit is not fruit that will perish with this world but fruit that will go on for eternity. The fruit that perishes is the fruit of the flesh but the fruit that lasts is the fruit of love. Paul said to the Corinthians…
1 Corinthians 13:3 And though I bestow all my goods to feed the poor, and though I give my body to be burned, but have not love, it profits me nothing.
What ever we do if it is not sown in love there will be no profit. Sow in love and reap.
Paul said to the Philippians… I seek the fruit that abounds to your account. The Philippians were disciples of Paul and he earnestly wanted for them to bear much fruit. We can see that it was Paul’s desire to see them grow, mature, and produce the fruit that God wanted them to produce, he said this because he had the same desires as his Heavenly Father. Our Father wants us all to bear lasting fruit. That is His desire, and should be ours as well.
My hearts desire is to sow life into others even as I have received, not only to sow into others but sow into others who will in turn sow into others themselves. As you have received, I encourage you to guard your heart, let the seed grow and flourish and produce fruit, and in your turn sow that seed into someone else’s life.
This truly is the fruit that lasts.”
Healthy, Responsible, Profitable
How do these three relate to what it is that I am doing?
I am interested in healthy stuff – healthy for the body, healthy for mind, healthy for the emotions, healthy for the spirit, healthy for the earth, healthy for others.
We are called by God to be Profitable.
Mat 25 describes it:
The Parable of the Bags of Gold
14“Again, it will be like a man going on a journey, who called his servants and entrusted his wealth to them. 15To one he gave five bags of gold, to another two bags, and to another one bag,a each according to his ability. Then he went on his journey. 16The man who had received five bags of gold went at once and put his money to work and gained five bags more.17So also, the one with two bags of gold gained two more. 18But the man who had received one bag went off, dug a hole in the ground and hid his master’s money.
19“After a long time the master of those servants returned and settled accounts with them. 20The man who had received five bags of gold brought the other five. ‘Master,’ he said, ‘you entrusted me with five bags of gold. See, I have gained five more.’
21“His master replied, ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!’
22“The man with two bags of gold also came. ‘Master,’ he said, ‘you entrusted me with two bags of gold; see, I have gained two more.’
23“His master replied, ‘Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master’s happiness!’
24“Then the man who had received one bag of gold came. ‘Master,’ he said, ‘I knew that you are a hard man, harvesting where you have not sown and gathering where you have not scattered seed. 25So I was afraid and went out and hid your gold in the ground. See, here is what belongs to you.’
26“His master replied, ‘You wicked, lazy servant! So you knew that I harvest where I have not sown and gather where I have not scattered seed? 27Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.
28“ ‘So take the bag of gold from him and give it to the one who has ten bags. 29For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them. 30And throw that worthless servant outside, into the darkness, where there will be weeping and gnashing of teeth.’
Wolfgang Kovacek is providing services in the venture capital, private equity, finance arena and is a business consultant, business mentor, entrepreneur, financial facilitator, manager, former web communication executive, film producer and director.
Wolfgang finds great joy in assisting entrepreneurs who want to see their dreams fulfilled. He is active in the private equity and growth capital investment industry contributing to the economic health of local, national and global economies. Developing long-term value is key in the decision making process of a Venture Capital and Private Equity Fund that invests in and builds enduring companies through the alignment of interests between investors and management. Wolfgang provides guidance and financial, operational and strategic resources and direction for approved companies.
What is Wolfgang’s passion?
- Expanding vision in nations and companies globally to bring wholesome strategies for the benefit of the community and its people.
- Engaging the public, policy makers, the media, and other stakeholders to encourage responsible investments, access to capital, economic growth and job creation.
- Eradication of systemic poverty, contributing to a greater spiritual awareness and increasing levels of well being that positively affects Health, Education, Work, Environment, Social inclusion and Parenting.
- Entertainment, Film, TV, Music, Fashion, Event Production,
- Green and Renewable Energy, Art, Real Estate, Infrastructure
- Medical Inventions, Technical Inventions, Media Inventions
Taglines: Business Mentor, Wealth Creation Craftsman, The CEO’s New Best Friend
Technically, venture capital is just a subset of private equity.
They both invest in companies, they both recruit former bankers, and they both make money from investments rather than advisory fees.
But if you take a look beneath the surface, you’ll see that they’re significantly different.
Technically, the term “private equity” refers to money invested in private companies, or companies that become private through the investment.
Most people in finance, though, use “private equity” to mean firms that buy companies through leveraged buyouts (LBOs) – so that’s how we’ll use it here.
There are a couple other categories of PE, so we’ll look at those at the end of this article.
What They Do
While both PE firms and VCs invest in companies and make money by exiting – selling their investments – they do it in different ways:
- Company Types: PE firms buy companies across all industries, whereas VCs are focused on technology, bio-tech, and clean-tech.
- % Acquired: PE firms almost always buy 100% of a company in an LBO, whereasVCs only acquire a minority stake – less than 50%.
- Size: PE firms make large investments – at least $100 million up into the tens of billions for large companies. VC investments are much smaller – often below $10 million for early-stage companies.
- Structure: VC firms use only equity whereas PE firms use a combination of equity and debt.
- Stage: PE firms buy mature, public companies whereas VCs invest mostly in early-stage – sometimes pre-revenue – companies.
The MERGERS & INQUISITIONS article is by Brian DeChesare.