The initial public offering of a company's shares on the stock exchange is the last stage in the development of a successful venture capital company. When a venture company lists its shares on the stock exchange, it becomes “public”, it receives all the profit on investments previously invested in the project.
2.6. Investor Revenue Generation and EXIT Strategies
Routes of "EXIT" of venture investors from the project and distribution of the profit received at the same time
Traditional ways of earning income for investors:
Dividends
At a certain time after receiving financing, the company pays dividends to investors. Dividends, as a rule, are distributed among investors in proportion to the invested capital. The amount of dividends is usually determined by the Board of Directors of the company, but subject to a limit on the amount.
Investor's withdrawal from the project according to a pre-approved schedule
At a certain time after the receipt of financing by the enterprise, investors have the right to return the invested funds by selling their shares to their original owner, but in such an amount that the enterprise has the required amount of cash. In the case when several investors want to exit the project at once, this is carried out in proportion to the invested capital and in accordance with a pre-approved schedule.
Redemption of a controlling stake in an enterprise from investors according to a pre-approved schedule
At a certain time after receiving the investment, the company has the right to buy back at a predetermined price the shares of the company owned by the investor. Redemption is made according to a pre-approved schedule.
Mergers, acquisitions, initial public offering of shares on the stock exchange
In the event of a merger, acquisition or IPO, it is impossible to predict what the investor's return will be. It is understood that any of these actions will be committed in the interests of shareholders.
Convertible Loan
An alternative to direct investment is a loan issued by an investor. In this case, the loan interest is determined with regular payments at a set time throughout the entire term of the loan. The investor has the opportunity to exchange the loan for an interest rate within a predetermined period of time (usually much less than the duration of the loan).
Chapter 3. Criteria for selecting projects by venture investors
3.1. Business angels and venture capital firms
3.2. Business angels
3.3. Advantages of business angels
3.4. Business angel syndicates
3.5. Examples of transactions with business angels and recommendations for finding business angels
3.6. Types of business angels and their participation in the development of the company
3.7. Venture capital firms
3.8. Search and selection of suitable venture investors
3.9. Corporate investors
3.10. Banks
Venture investors
3.1. Business angels and venture capital firms
Main differences
Business angels
Venture capital firms
Behavior
Entrepreneurs
Finance Managers
Invested money
Own
Aliens
Client firms
Small, early stages
Medium and large, late stages
Careful check
Minimum
extensive
Project location
Important
Less important
Contract
Simple
Exhaustive
Monitoring
active, detailed
Strategic
Participation in management
Important
Less important
exit routes
Less important
Very important
Return on investment
Less important
Very important
Differences between business angels and venture capital funds