Venture capital and private equity assignment problems
Although venture capital and private equity are different, due to their similarities they are often discussed together. Students may become confused as to differences in private equity services and those of venture capital firms. It is also necessary to have a good understanding of the time value of money, valuation methodologies and cost of capital which are aspects of venture capital and private equity that give students problems. Our finance homework service is an option available to those who encounter difficulties with either venture capital or private equity assignments.
Venture capital and private equity firms invest in companies and exit through selling their investments in equity financing, such as initial public offerings (IPOs). They are a form of risk capital that is invested as shares (equity) rather than as a loan and investors require a higher rate of return to compensate for the increased risk.
Venture capital and private equity basics
Both private equity firms and venture capital firms go through a cycle that consists of a fundraising stage, an investing stage and the exit stage. However there are some significant differences as shown here.
Private equity firms: the private equity market has its risks but not to the extent that venture capital firms do.
- Buy mature companies that are established. They look for companies not making the profits they should be due to inefficiency, buy them and make changes to increase revenues.
- Usually buy 100% ownership of the companies in which they invest giving them complete control.
- May invest $100 million and up in a single company.
- Can buy companies from any industry
- Use both cash and debt in their investment
Venture capital firms: although more risky, the potential return on initial investment could be much higher percentage wise.
- Invest in start-ups with high growth potential.
- Have 50% or less of the equity of companies they invest in and spread the risk over many companies.
- Spend $10 million or less in each company as unpredictable chances of failure or success with startups
- Limited to certain types of start-ups
- Deal with equity only
You don’t have to look far to find some well-known companies that have received venture capital. Examples include Apple, Compaq, Digital Equipment Corporation, Federal Express, Genentech, Google, Intel, and Microsoft. Investing is the most critical stage of the three stage venture capital cycle and valuation of companies is critical. Should you encounter problems with any aspect of venture capital and private equity assignments, our finance homework service is well qualified to help.
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