Venture capital refers to an investment method in which professional financiers invest in emerging, fast-growing unlisted companies (mainly high-tech companies) with great competitive potential, provide financiers with long-term equity capital and value-added services on the basis of taking huge risks, foster the rapid growth of enterprises, and recover their investment through listing, mergers and acquisitions or other equity transfer methods several years later and obtain high investment returns.
Investment target: emerging, rapid growth and great competitive potential.
Capital attribute: equity capital (medium and long-term investment)
Investment purpose: pursuing high return (financial investment)
Second, the basic characteristics of venture capital
1 is an equity investment.
Venture capital is not loan capital, but equity capital; Its focus is not on the current profit and loss of investors, but on their development prospects and asset appreciation, so as to achieve the purpose of divesting capital and obtaining high returns through listing or sale. Therefore, a clear property right relationship is a necessary prerequisite for venture capital intervention.
This is an unsecured and high-risk investment.
Venture capital is mainly used to support high-tech enterprises or high-tech products that have just started or have not yet started. On the one hand, without fixed assets or funds as collateral and guarantee for loans, it is impossible to obtain funds from traditional financing channels, so we can only open up new channels; On the other hand, there are great risks in technology, management, market and policy. Even in developed countries, the success rate of high-tech enterprises is only 20% ~ 30%, but because of the high return rate of successful projects, it can still attract a group of investors to speculate.
3. It is a medium-and long-term investment with less liquidity.
Venture capital is often invested in venture enterprises at the initial stage, and it usually takes 3-8 years to gain income by reducing capital. During this period, it is necessary to continuously increase capital for promising enterprises. Because of its low liquidity, some people call it "sluggish funds".
This is a highly specialized and programmed portfolio.
Because venture capital mainly invests in high-tech industries, the investment risk is high, so venture capital managers are required to have high professional standards, be highly specialized and procedural in project selection, carefully organize, arrange and select, and lock in investment risks as much as possible.
In order to spread risks, venture capital usually invests in a project group with more than 10, and uses the high return of successful projects to make up for the losses of failed projects and gain profits.
This is an investment in which investors actively participate.
Venture capital and high-tech constitute two wheels to promote venture capital, and both are indispensable. When venture capitalists (companies) inject capital into venture enterprises, in order to reduce investment risks, they must intervene in the management of enterprises, provide suggestions, participate in the decision-making of major issues, and even fire the company manager when necessary, take over the company personally, and try their best to help enterprises succeed.
6. It is a financial investment that pursues excess returns.
Venture capital is an investment behavior with the main purpose of pursuing excess profit return. Investors don't take gaining a strong competitive position in a certain industry as the ultimate goal, but take it as a means to achieve excess returns, so venture capital has a strong financial investment attribute.
Three, the four elements of venture capital
1 venture capital
Venture capital refers to a kind of capital provided by professional investors, which is used to invest in emerging enterprises with rapid growth and great appreciation potential. Under normal circumstances, because the financial situation of the invested enterprise cannot meet the demand of investors to withdraw funds in a short period of time, it is impossible to obtain the required funds from traditional financing channels such as bank loans. At this time, venture capital enters these enterprises by buying equity, providing loans or both.
China, USA.
Annuity foreign fund
Insurance companies and industrial companies (mainly listed companies)
Industrial companies, venture capital companies (with strong government background)
Individuals and families
Funds and non-bank financial institutions
investment bank
Non-bank financial institutions
Foreign fund
2. Venture capitalists
Venture capitalist is the operator of venture capital and the central link in the process of venture capital. Its job functions are: identifying and discovering opportunities; Screening investment projects; Decide on investment; Promote the rapid growth and exit of venture enterprises. After the funds are screened by venture capital companies, they flow to venture enterprises and then return to investors through venture capital companies.
Venture capitalists can be roughly divided into the following four categories:
The first category is called venture capitalists. They are entrepreneurs who invest in other entrepreneurs. Like other venture capitalists, they make profits by investing. But the difference is that the capital invested by venture capitalists belongs to themselves, not the capital entrusted for management.
The second category is venture capital companies. There are many types of venture capital companies, but most of them invest through venture capital funds (venture capital companies not only raise venture capital by setting up venture capital funds, but also directly raise capital from investors, and the company itself also adopts a limited partnership system, in which investors become limited partners and company managers become general partners). These funds are generally organized in the form of limited partnership [although limited partnership (LP) is the main organizational form, in recent years, American tax law also allows limited partnership (LLPs) and limited liability company (LLCs) as another alternative organizational form of venture capital companies].
The third category is enterprise venture investors/direct investors. This kind of investment companies are often independent venture capital institutions under some non-financial industrial companies, and they invest on behalf of the interests of the parent company. Like professional funds, such investors usually mainly invest their funds in some specific industries.
The fourth category is called angel investors. Such investors usually invest in very young companies to help them get started quickly. In the field of venture capital, the word "angel" refers to the first investors of entrepreneurs, who put money into the company before its products and business take shape. Angel investors are usually friends, relatives or business partners of entrepreneurs. Because they are convinced of the ability and creativity of entrepreneurs, they are willing to invest a lot of money in entrepreneurs before the enterprises come in.
3. Venture enterprises
If the function of venture capitalists is value discovery, then the function of venture enterprises is value creation. Venture entrepreneurs are the inventors or owners of new technologies, inventions and ideas. They seek the help of venture capitalists because of the lack of follow-up funds when their inventions and innovations are carried out to a certain extent. Apart from lack of funds, they often lack management experience and skills. This also needs the help of venture capitalists.
4. Capital market
Capital market is the only way to realize the value-added of venture capital. Without a developed and perfect capital market, it is impossible for venture capital to obtain excess returns, thus making venture capitalists lose their source power for venture capital.