HomeVenture Financing
Date: 2019-12-09
Table of Contents
Sustainable growth
There is a relation between country welfare and companies’ growth. Is this relation direct or indirect?
During the last years, the world’s top 5 companies are all related to tech and there are no European ones. Europe is trying to push in order to be on that list with a representative in the next years.
Technology and innovation are becoming more and more important.
Acronyms
| Acronym | Definition |
|---|---|
| MVP | Minimum Viable Product |
| FFF | Family, Friends, Founders (or Fools) |
| BA | Business Angel |
| VC | Venture Capitalist |
| PE | Private Equity |
| IPO | Initial Public Offer |
Venture financing cycle
At first you “lose” money, because of the expenses and the investment costs; then you start to earn.
In the first phase, the only people who believe in you are the triple F: Family, Friends, Founders (or Fools).
Then there are the business angels who help you Example:with contacts.
Then venture capital, when your product starts to gain success; they help you to reengineer the idea and to increase the selling.
Then you try to fund specific products with private equity founds, bank loans.
In the end, you go public with stock exchange IPO (Initial Public Offer).
Ways to get funds
Debt Capital
- Temporary form of funding provided through a contractual basis
- One should return the capital plus the debt remuneration
- The credit provider does have no operational power
Risk Capital
- Stable form of funding provided through a company governance agreement (unlimited duration)
- No contractual remuneration, but only dividends
- Capital provider (co-owner) has the right to participate and have an active role in the enterprise governance
Private Equity — Helpers
Business Angel
- Physical person(s)
- Help to growth
- They allocate a fraction of their financial capability
- They usually know the start-up world
- Typical invest is between 50k to 250k Euro (even less in Italy)
- Typical expected return on investment is above 20% per year
- They are usually passionate about the idea, they don’t do it only for the money
Ventuare Capital
- Financial entities
- They want a sit in the decision board
- Usually competent on the domain
- Medium to long term period strategy (in 7 years they sell their shares)
Bring the idea to financing
Having a good idea is difficult but you are not the only one who has good ideas. The most important part is to have a solid vision of the implementation.
Only 1% of the proposals reach the financing stage.