FREE online courses on Venture Capital Funding - The Venture Capital Industry - Private equity investing

 

 

·         An institutional investor allocates 2% to 3% of the institutional portfolio for investment in alternative assets such as private equity or venture capital as part of the overall asset allocation.

 

·         Currently, over 50% of investments in venture capital/private equity come from institutional public and private pension funds, with the balance coming from endowments, foundations, insurance companies, banks, individuals and other entities who seek to diversify their portfolio with this investment class.

 

Investment focus

Depending on their investment strategy, Venture Capitalists may:

·         Be generalists, investing in various industry sectors, geographic locations, or stages of a company's life.

 

·         Be specialists in one or two industry sectors, or may seek to invest in only a localized geographic area.

 

·         Invest before there is a real product or company organized (so called “seed investing”).

 

·         Provide capital to start up a company in its first or second stages of development known as “early stage investing.”

 

·         Invest in a company throughout the company's life cycle and therefore some funds focus on “later stage investing” by providing financing to help a company grow beyond a critical mass to become more successful (“expansion stage financing”).

 

·         Specialize in the acquisition, turnaround or re-capitalization of public and private companies that represent favorable investment opportunities.

 

Period of investment

 

An early stage investment may take seven to ten years to mature, while a later stage investment may only take a few years, so the appetite for the investment life cycle must be congruent with the limited partnerships' appetite for liquidity. The venture investment is neither a short term nor a liquid investment, but an investment that must be made with careful diligence and expertise.