The most commonly used definition of venture capital firms structure in Europe is: “A financial activity consisting of making fixed-term investments in the form of capital, convertible or non-convertible debt securities, and current advances. partners in private companies. Venture capital firms structure is the fundamental support for an unregistered company throughout its existence. It finances the launch, development, transfer or acquisition of this company. “The terms” venture capital “and” capital venture investor “are sometimes used interchangeably. Although any investment in a business carries significant risk, it makes sense to distinguish between these two concepts. The term” capital venture investor ” will be used as a generic term, while the term “venture capital” will be reserved for financing startups.
Capital development – the growth or expansion of capital. Investors provide equity or quasi-equity financing, usually in the form of a minority, to finance the development of a company or the purchase of shareholder positions. At this stage, the partner company is usually a mature company that has reached its breakeven point and has significant growth prospects. This transaction is aimed at supporting the manager in financing the organic and external growth of the company in order to create value and liquidity in the medium term. Transfer of capital – repurchase of capital Transfer of capital consists in acquiring most of the capital of a mature company through a combination of capital and bank financing (structured debt).
Capital turnover – Working capital investors provide equity financing to companies in difficulty. Thanks to this method of financing, the investor provides the directors with the opportunity and means to take measures to restore activity in order to ensure the return of profit.
Management of the capital venture firms. Life cycle of a private equity fund. The typical life cycle of a private equity fund consists of 3 stages: – The investment phase, from the first to the fourth or fifth year, corresponds to the period during which the capital is called and invested in target companies. – At the development stage, from the third to the eighth year, the initial investment reaches maturity, and the first results are realized. Investors begin to pay, and some additional investments are made. – The liquidation phase, starting from the eighth year, during which the last investment is liquidated.
Depending on these stages, the value of the net assets of the investment follows the curve J and reaches its maximum at the end of the life of the fund. During the first years, the curve reflects the low return on the investment fund corresponding to the investment phase. Only from the third and fourth year the curve is restored, and the fund becomes more and more profitable.
When creating an investment portfolio, some institutional investors believe that the long-term return on investment funds will be more attractive than investing in listed stocks and bonds. Show that in the long run, effectiveness is tested. The implementation of capital investments in unregistered companies allows institutional investors to be less exposed to stock market fluctuations. Thus, investments are less prone to cyclical changes.
A relatively recent area of activity appeared only in the early 1990s and will only be valid in 1993 with the creation of a management company, an industry pioneer and a subsidiary of the Central Bank. popular. For a long time was the only operator in the market. Other investment funds will see the light of day only from 2000, the year of creation founded on the initiative of four operators.
Today, most investors are united in the capital. The dynamism of the sector will lead to the fact that the state will actively participate in the development of investment. Given the dual role of a financial investor seeking the best results for the funds that it manages, and as an institution supporting the development and modernization of the economic structure, this business has made investment policy important. Banking institutions were also attracted by the potential for business development and created their own investment funds.