Scribd Logo
Upload

Welcome to Scribd!

  • 37 views

    PE and VC

    Uploaded by

    Tanishqa Jogani
    Private equity (PE) includes venture capital (VC) investments in early stage companies. With PE/VC financing, the investor receives shares of the company's equity in exchange for cash. This provides the company funding without interest expenses. The PE investor not only becomes a shareholder but also contributes to management, especially for smaller companies. The company benefits directly from funding and indirectly from certification, networks, knowledge and reduced cost of capital from the PE investment. PE investors can take either minority or majority stakes depending on the company's stage of development.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    PE and VC

    Uploaded by

    Tanishqa Jogani
    37 views2 pages
    Private equity (PE) includes venture capital (VC) investments in early stage companies. With PE/VC financing, the investor receives shares of the company's equity in exchange for cash. This provides the company funding without interest expenses. The PE investor not only becomes a shareholder but also contributes to management, especially for smaller companies. The company benefits directly from funding and indirectly from certification, networks, knowledge and reduced cost of capital from the PE investment. PE investors can take either minority or majority stakes depending on the company's stage of development.

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Private equity (PE) includes venture capital (VC) investments in early stage companies. With PE/VC financing, the investor receives shares of the company's equity in exchange for cash. This provides the company funding without interest expenses. The PE investor not only becomes a shareholder but also contributes to management, especially for smaller companies. The company benefits directly from funding and indirectly from certification, networks, knowledge and reduced cost of capital from the PE investment. PE investors can take either minority or majority stakes depending on the company's stage of development.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    37 views2 pages

    PE and VC

    Uploaded by

    Tanishqa Jogani
    Private equity (PE) includes venture capital (VC) investments in early stage companies. With PE/VC financing, the investor receives shares of the company's equity in exchange for cash. This provides the company funding without interest expenses. The PE investor not only becomes a shareholder but also contributes to management, especially for smaller companies. The company benefits directly from funding and indirectly from certification, networks, knowledge and reduced cost of capital from the PE investment. PE investors can take either minority or majority stakes depending on the company's stage of development.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    PE – 2 aspects

    Source of financing
    Investment from the institution point of view

    Throughout the course, the definition of PE will be used in its broad meaning, which
    also includes VC

    VC is a very specific case of PE. The investments in the very early stage of a company’s
    life.

    How does the relationship between the PE and Venture backed company work?

    The investor gets shares of the equity of the company in returns for the inflow of cash.

    Venture backed company

    ASSETS DEBT
    Private
    Equity
    Shares Investor
    EQUITY

    Cash

    Consequences of financing

     A company needs money for a certain and clearly identified reason


     A company collects moneys with the issuance of equity on the private market, the
    company does not pay any interest expenses to the PE
     The newly issued shares will be bought by the PEI
     The professionals will not only become an shareholder but will contribute to the
    management of the company. The smaller the company is the larger the contribution
    of the PEI in the business management will be.
     The Investor will create profit only through generation of capita gain i.e. existing
    from the investment by selling shares to someone else on the market

    The most crucial aspects in PE is the strict relationship between the investor and the
    entrepreneur.

    Pricing Liquidity Monitoring


    The price is driven by the Liquidity is very high. When trading on a stock
    market either upward or Whenever an investor there is always a very high
    downward wants to sell the shares of level of protection for the
    the public company there shareholders, regardless of
    is always a buyer their stake in the company
    The price is the result of Selling is not that easy, They have to protect the
    negotiation process which Since there is no stock shareholders
    be both easy or hard exchange

    The venture backed company has direct and indirect benefits


    Direct- Funding
    Indirect- certificate, network, knowledge and financial benefits

    The certificate benefits- confirms the very high quality of the company’s accounts
    The network- PEI can give Company a very strong network, in terms of supplies,
    consumers, and bank therefore multiplying its possible contact
    Knowledge- Soft and hard- Soft- capability to manage the business
    Hard- field knowledge
    Financial- injection of cash in returns of shares, effects on the cost of capital.

    Equity ^ Rating ^ Positive effect on the cost of capital( reduces)

    Development  Startup Early growth  Expansion (Expansion Financing) 


    Mature Age ( Replacement)  Crisis (vulture financing)

    PEI- Minority ( later stage) / Majority (start up phase)

    Hands – on
    Hands off

    You might also like