Venture financing in simple terms - the main features. Who is a Venture Investor Venture Investment Terms

Good afternoon, dear reader!

I'm sure you know who an investor is, but did you know that there is a rather exotic variety of it? Today I want to consider who are venture investors in Russia and what is their function in the financial market.

Before talking about what venture capitalists are doing, I suggest that you familiarize yourself with those who made money doing just this.

So, the top 5 most successful investors in Russia:

Yuri Milner was named the most successful venture investor. He earned capital through successful investments in Zygna, Facebook and other projects. Milner is said to have been the luckiest investor in the Alibaba Group and the Twitter IPO. On this he is not going to stop.
Viktor Remsha is known in Russia as the founder of the Finam brokerage company. He received the title of a successful venture investor after the sale of the joint product of Afisha and Rambler - the Begun service. Until 2012, he owned 49.9% of the shares of this company. He is actively investing in the Banki.ru resource, the production of PC games.
Leonid Boguslavsky. Owns 20% of Ozon.ru shares, co-owner of ru-Net Ventures (Russia), RTP Ventures (USA) venture funds. He is actively involved in more than 20 projects, mainly related to the Internet.
Alexander Galitsky founded the Almaz Capital Partners fund. Today he is one of the sponsors of the Foundation B612 project, whose goal is to create a powerful telescope capable of tracking asteroids.
The head of the Russian venture fund Bright Capital Mikhail Chuchkevich, who manages $ 220 million, is at the bottom of our rating. In recent years, he made a number of major transactions, for example, sold the DealAngel hotel selection service.

Now I’ll tell you what exactly they do.

What is venture investing

The translation of the word venture means "risk". So, by definition, venture investing is a risky endeavor. The object is small enterprises that have just appeared on the Russian market. It is thanks to venture capital investments that the company creates a product that "explodes" the market.

Briefly, the diagram looks like this. It works the same way both in Russia and abroad:

The start-up company sets ambitious goals and invites investors.
The businessman allocates money, but in return receives a share in the business.
If the company achieves its goals, the businessman's profit increases many times over. If not, the investor loses everything.

Due to the high risks in this business, many Russian investors prefer to independently manage projects, applying their knowledge and experience. In this case, the businessman is called a business angel.

Difference from direct investment

Unlike the traditional scheme, venture capitalists do not invest in management and corporate structures, but in startups that can turn the world around.

If direct investment is set to fix the return at the center of a bell-shaped distribution, VCs capture asymmetric returns at the end of that distribution. Traditional investors assess risks and forecast profits. Venture capitalists try to predict whether a project will succeed or not.

If necessary, venture investors can instantly change the business model, which cannot be said about the traditional ones. Direct investment is an attempt to control the development of a company, venture investment is to retain a position on the board in order to be useful to a young enterprise.

Venture Capital Mechanism

For a better understanding of this kind of investment mechanism, I will give the main features:

There is no guarantee that the investment will return. Throughout the investment, the businessman may not make any profit, but may ultimately sell the stake for several billion.
High threshold for entering the business. With just a few hundred dollars, you won't become a venture capitalist. Here are invested amounts starting at $ 10,000 and ending in billions. However, there are funds that accumulate money from small investors to invest in large projects. Their only drawback is that the investor trusts the manager and does not participate in the project.
Long investment horizon. If a businessman invests in a startup, he cannot withdraw it at any time. The money can be returned only after the successful development of the company, while it may take several years before reaching large production volumes.

As you can see, venture investing in Russia is not as easy as it seems at first glance. An ill-considered decision can easily make you a millionaire or ruin you.

Russian foundations and associations

More and more often there are not individual businessmen, but foundations. In Russia, their number is 260 units, of which 30% are state associations. One fund has about $ 20 million for the development of startups.

Russian state funds are invested in small business in the real sector. Private - in technology, for example, robotics is considered a promising direction. According to 2017 data, a total of $ 777 million was invested in startups in the first half of the year. State associations contributed 63%.

The largest private funds include Softline Venture Partners, Target Global, Prostor Capital, etc. A large state fund in Russia is the Venture Capital Association, which includes AFK Sistema, VEB Innovations, RVC and other large enterprises.

How a startup can find venture capitalists in the Russian Federation

First, you can use dating. Benefits - the trust of a business angel. Disadvantages - a laborious and lengthy process if there is no direct acquaintance with investors who are ready to help a young company.

Secondly, you can join business incubators. These are companies that support start-ups in exchange for a stake in the business. Employees provide premises for work, hire an accountant and a lawyer, provide information support, and help raise money for the project.

Thirdly, it is necessary to actively participate in startup competitions. By participating at different levels and offering a truly innovative product in your presentation, you will attract the attention of many investors.

Each method is good in its own way. In my opinion, it is better to start with contests.

Where can an investor look for projects for venture capital investments?

A good businessman always works with several startups because he understands that venture investing is a risk. According to statistics, out of 10 companies, only one is successful.

That is why the expected profitability of a startup should exceed the investment amount by at least 10 times. A businessman aiming at a successful investment of money does not wait to be found. He constantly monitors the market in search of a profitable investment.

Ways to find a successful project in Russia:

By acquaintance. Probably, everyone in the environment has a person who is looking for money for business development. The average resident of Russia will ignore information, but a true businessman will take an interest, carefully study the project and make a decision on investment.
At the Seliger forum, one of the shifts is named Entrepreneurship. Investors often come here in search of interesting startups with a threshold of entry up to $ 50,000.
Exchange of projects. There are sites in Russia where young scientists post quite interesting projects.
Share exchanges. These are the platforms that regulate the relationship between startups and venture capitalists. A businessman acquires a stake in a company through the stock exchange.

The main thing that an investor should remember in Russia is that he needs to constantly keep his finger on the pulse and monitor the market. It is not known when a proposal will appear that can turn the world, as Apple did in its time.

Conclusion

Venture capital investment is a real way to channel money towards the development of a product that can blow up the market. This method of raising capital suits active and ambitious young scientists.

As for Russian businessmen investing in a project, they should remember that this is always a risk. A product that is effective in its description can burn out, and a seemingly nondescript undertaking can take off.

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Hello! In this article, we will tell you about venture capital investments and introduce you to the main types of these investments. They are increasingly being used to promote new startups in the market and help introduce promising innovations.

Today you will learn:

Which are referred to as venture;
What are the pros and cons of this;
How to get venture capital investments for a project.

The word "venture" can literally be translated from English as "risky business". This perfectly reflects the meaning of such investments. They can bring either a complete collapse, or huge profits, which more than cover all possible disadvantages of the project.

Having appeared in our country relatively recently, the venture capital has already contributed to the development and successful formation of some companies: Lingua Leo, Rolsen, the Astrum gaming holding or the KupiVIP sales club.

What is Venture Investment

Venture capital investment refers to the investment of capital in various, which are risky and long-term. They are often used for young projects based on IT technologies related to the development of applications for gadgets, medicine or.

Sometimes they are attracted to operating enterprises in the event of a complete modernization.

The main differences from the usual direct investments:

High probability of loss of funds, no guarantee of a positive result;
The capital is issued rather "on parole" of the future entrepreneur;
Cooperation with inexperienced and novice businessmen;
The first finances are invested at the idea stage.

With conventional strategic investment, the lender prefers to invest in an already promising company. It has a well-developed and proven way of selling a product or service, and risks are minimized and well controlled.

The investor's goal in this case is to receive regular dividends or to seize a controlling stake, to fully buy out the enterprise.

It is better to explain the principle of venture capital investment with a specific example.

Example. The young entrepreneur has, but does not have the means to implement it. The investor is ready to cooperate and finance innovative developments for a share in a still non-existent project. This is a big risk, because it is almost impossible to predict success. But, if successful, the borrower can make huge profits, not limited by the monetary framework.

Venture investments differ significantly from strategic investments.

Several characteristic features can be distinguished:

More often, borrowed capital is provided for a talented person or a promising team than for a specific business plan;
In case of a successful outcome, you can get back the money invested no earlier than in 3-5 years. An even longer stage of "promotion" for scientific startups that require complex elaboration of details and special tests;
The investor initially knows that his stake in the newly established company will be sold. He does not seek full control and is constantly looking for new promising ideas;
For the first few years, there is no question of profit or dividends: any income is spent on further development and increasing turnover. The investor himself is interested in this and is in no hurry to withdraw his investments until the company starts stable and profitable work.

With venture investment, there are only two options for the development of events: either the company will become successful and the profit from the transaction will more than cover all costs, or the project will stall and cause losses.

In the second case, the investor completely loses his investments, and the failed entrepreneur does not compensate for the damage. This is another important difference from direct investment, where a bankrupt businessman is obliged to fully repay the loan with high interest rates from above.

Types of venture capital investments

There is no exact definition of the term "venture capital" in the economic literature. It is a special financial instrument that is risk capital. It is used to develop and bring to market a new enterprise whose technology is based on innovation and scientific development.

In Russia, the venture capital market has been actively developing only since 2000, but it has already brought many successful projects into business. An inexperienced businessman gives a certain part of the future business, but this is better than completely abandoning the idea.

What are the advantages for the investor himself, who does not receive any guarantees and may suffer large financial losses?

Among the obvious advantages of this type of investment:

Maximum and unlimited profit with a successful promotion of a business project. There are many real-life examples where the return of funds exceeded the investment of 1000% in just a few years;
For the "promotion" of the project, a small amount is often enough. Obtaining a bank loan for young and inexperienced entrepreneurs is an unreal problem in domestic business practice. Venture investors are more willing to invest in interesting projects with no visible prospects, without requiring 100% guarantees and collateral;
Working with each new case brings a special experience helping the investor to grow as a businessman. Financial flair develops and its own investment portfolio is formed. In addition, venture investment is increasingly attracting and encouraged by government agencies, therefore it adds a certain fame and solidity to the business angel.

The entrepreneur receives real money for development, which is not subject to a huge loan interest. He does not respond with property in the event of a fiasco, he feels more freedom of action for self-expression. The investor shares his knowledge, connections and tries to bring the invested project into a profitable one. We can say that the former invests intelligence, and the latter invests free finances.

Almost the only disadvantage of this type of financing is the too great risk of complete loss of investment. Most of modern projects are related to virtual reality and the Internet, so it is simply unrealistic to calculate the profit. According to statistics, only 10–20% of the total number of funded projects are successful.

Features of financing startups

The most "tidbit" for any investor is innovative projects. can bring huge profits and notoriety for an angel investor or venture capital fund. By investing $ 100,000 in Amazon, entrepreneur Thomas Alberg received $ 26 million from the brand's resale.

There are several ways to find an investor for your promising startup:

Join special business incubators for beginners... For a certain percentage of the share of the future enterprise, these organizations are ready to offer an office space, assistance from lawyers and economists, training in the basics of entrepreneurship and close cooperation;
Use personal acquaintances and connections. The method is ineffective for young talents who are just entering the market. Here, native family members are more likely to act as investors;
Participate in special annual contests or forums... For example, the Seliger Youth Congress attracts thousands of innovators and investors from all over the country every year and is encouraged by the Russian government at the highest level.
Post data on exchanges or startup sites... The online platforms inproex.ru and startup.ua are popular in Russia. They provide a broad base to help investment-seeking companies start collaborating.

In order to get a startup to market faster and faster, the entrepreneurial team is better off using all available search options. The most in demand are innovations in the field of medicine, online sales, Internet technologies and applications for gadgets. More and more foundations are interested in educational programs for different ages and green environmental practices.

Sources of financing

The Russian venture capital market is just gaining momentum. In Europe and the USA, such projects account for at least 40% of all investments in small and medium-sized businesses.

A budding domestic entrepreneur can turn to the following organizations or individual investors for help:

Closed affiliate programs based on the personal funds of a large businessman.
Public funds for investment capital.
Venture funds owned by corporations or banks.
State.

In Russia, it is difficult for a future entrepreneur to take out a bank loan without providing serious guarantees. Banks prefer to cooperate with established companies that have real estate and a long period of work. Therefore, it is better for talented inexperienced startups to turn to venture funds or private business angels.

In some situations, relatives or acquaintances may become investors. If they have free capital, they can invest it in a new business project and get excellent profits in a few years.

How a venture fund works

Specialized organizations that are focused on providing investment to interesting startups and innovative business projects are called venture funds. The purpose of their work is to profitably invest free funds in a promising company and get huge profits after the sale of their share or shares.

The founders of such financial organizations are successful top managers or experienced businessmen who have stable working corporations behind them. They are ready to voluntarily provide their experience and finances to startups who are able to interest them with a serious and well-reasoned business plan.

Some foundations pool the capital of several people. They brought to the market projects such as LinguaLeo, the popular game developer Alawar, the Rolsen and Ozon brands.

Simplified stages of venture financing for the example of a fund look like this:

The organization's managers are looking for interesting projects on forums, exhibitions or social networks.
The chosen startup is carefully analyzed by economists who try to assess the benefits and potential income if successful.
Business plan development begins. It includes all stages of the development of a new enterprise, selects channels and markets for products.
A detailed growth strategy is drawn up, taking into account possible force majeure circumstances.
A special investment agreement is concluded, which indicates the shares and rights of the parties.
The enterprise, with the support of investors, starts to work. A good venture capital fund accompanies young entrepreneurs at all stages, provides them with various consultations.
If the startup is successful, the fund exits the investment by selling its stake or shares in the financial market.

This difficult and risky path has been made by such world famous corporations as Microsoft and Apple. In Russian practice, the most successful (today) venture projects are Yandex and CTC-media. The first in 1999 attracted borrowed funds from 2 funds, raising its annual profit from $ 70 thousand to $ 300 million. The second was developed by well-known Russian investors MTG Broadcasting AB and ABH Holdings Corporation and increased its capital to $ 2 billion.

Popular venture capital funds in Russia

Startups should be careful when choosing a potential lender. The further fate of the project, its stable and successful work depends on this.

Before submitting an application, you need to familiarize yourself with the reviews and achievements of the organization, its requirements and suggestions. It is advisable to personally communicate with entrepreneurs who are already cooperating with the fund and have reached a certain level.

Among domestic startups, the most demanded are:

Russian Ventures. The company is interested in new IT technologies. Considers small startups and quickly responds to requests from applicants.
ABRT. A successful fund with a large authorized capital. Actively working with projects based on new software and services on the Internet, he can boast of startups KupiVip or Oktogo.
Addventure II. He works with start-up entrepreneurs who offer new developments in the field of e-commerce and interesting software for smartphones. Begins to cooperate at a very early stage and actively helps with consultations.
RVC. A government venture fund that promotes technology and science projects. But he always acts as the second investor, investing small amounts.
Softline Venture Partners. One of the most successful investors with 13 promising companies in his portfolio. He is more interested in telecommunications and artificial intelligence technologies.

Most venture capital funds have applications through which they accept applications. You can also get acquainted with the representatives and requirements at various business forums or specialized exhibitions.

Cooperation with business angels

The poetic name hides a new kind of investor. These are individuals who invest in startups, helping them develop and enter the market. Like venture capital funds, they prefer to sell a stake in an established company and earn good profits from it.

They act independently or team up with other investors to participate in projects. This is the most closed group of private investors who offer investments in the amount of $ 50 thousand to $ 1 million.

The main differences between business angels and venture funds:

They invest only their own (personal) funds. Many people manage the finances of investors, so they do not want to take risks and cooperate with unpromising business projects.
They are engaged in investing professionally, therefore they cooperate with newcomers in business, they are not afraid to delve into new areas of activity.
They make decisions more flexibly, they are guided not only by "bare" calculations, but also by their own experience. They are more embedded in a business project, transferring their skills and knowledge to aspiring entrepreneurs.

Famous entrepreneurs, former top managers of reputable companies act as business angels. They try to invest their savings or free funds in innovations, understanding their whole perspective in the future. Notable overseas investments include the expensive brands Yahoo !, Alibaba, Intel and Biogen.

Step-by-step guide to venture investing

When startups have chosen a fund in which they would like to receive funding, they are faced with the task of how to correctly present the project in order to get a positive response.

Out of thousands of inquiries to the investor's address, only 10% attract attention and are considered. The average processing time for an application is one to six months. Therefore, it is important to present a business plan and calculations in such a way as to stand out from the crowd and get money for development.

There is a rough step-by-step scheme for a budding entrepreneur:

Choosing a venture fund for further cooperation. You should first analyze the work and portfolio of the organization, study the requirements for business projects, which startups it is interested in. If you need a small amount of 200-300 thousand dollars, you should not look for funds with million-dollar proposals.
We carefully prepare the presentation. Many entrepreneurs mistakenly believe that venture capitalists are only interested in mock-up and raw calculations. At the stage of consideration, they study the composition and cohesion of the team, its readiness for force majeure situations and the rhythm of work. The main thing is to immediately identify the benefits for a potential lender.
We are negotiating with fund managers. The presentation usually takes several minutes, so it should be dynamic and memorable, provide maximum information and not contain "water". It is necessary to show leadership qualities and ability to control the situation. It is better to work out all the little things and numbers, because "inconvenient" questions are not excluded.
Working on a business plan... At this stage, the specialists of the venture fund join in, helping to work out each point. A detailed business plan is drawn up for 3 years and provides for methods of market promotion, features of profit distribution and all possible costs for modernization. This is a financial model of a business project that will soon turn into a going concern.
We sign an agreement with the investor. On average, the development of a business plan and all legal nuances lasts no more than 3 months. After that, a developed agreement is proposed for signing by the parties. A novice entrepreneur is unlikely to see pitfalls in it and understand all the consequences, so it is better to involve an experienced lawyer to study it. This will help to avoid enslaving conditions in further cooperation.

Domestic venture business is developing rapidly. At the end of 2016, Russia ranked 4th in the world in terms of the volume of risky investments. There are at least 20 venture funds operating in the country, business angels with big names have appeared. Unfortunately, growth is constrained by the lack of special government subsidies and grants, and a low percentage of investment capital liquidity.

Most investors fail to understand that traditional investment paradigms do not need to be applied to venture capital investments. A typical problem is emerging in new ecosystems: the classic paradigms of direct investment remain in place, and no one is implementing the best principles of venture capital.

Successful venture capitalists are not afraid of failure. In just one day, a startup can completely transform its business model, because such complex decisions need to be made as quickly as possible. Therefore, the leadership must be ready for change. What's more, quick course adjustments should be part of a startup's day-to-day business. Is one of the most popular tricks of any successful startup.

VCs understand that startups have to make decisions quickly and flexibly in order to capture markets, disrupt old segments, and create new ones.

Short investment cycles

The traditional investor seeks to invest in the growth of one company over the course of several years.

Venture capital operates on a shorter time frame (12-18 months per cycle) and implies subsequent rounds of investments.

Large companies plan for long periods of growth and generate positive cash flow for this. They raise loans to pay for operating expenses and keep cash flowing over the long term. The share capital increases in response to external circumstances to cover costs. In other words, what is bought for the stock must be tangible.

Startups, on the other hand, rarely have a positive cash flow, and even less often generate profits. Thus, they do not have to rely on borrowed funds, and the only way to finance the growth of a startup is through equity investments. The funds are spent on operating expenses and to achieve certain milestones that will help carry out the next rounds of investments.

Venture capital is used to cover operating expenses and achieve short-term goals in order to move on to the next investment round.

Constructive approach

Traditional investors hold board positions to oversee the development of the company.

VCs hold board positions to be as useful as possible to the startup.

Traditional investors prefer to influence strategic decision-making in companies. They invest in businesses they see as promising, regardless of the ability of the current leadership. These executives are often replaced by those recommended by the investor. If these performers do not cope, others are found in their place.

From the point of view of a venture investor, such a policy can hinder the development of a truly promising business. Instead, they choose to invest because they believe in the founding team's ability to fulfill their vision. Venture investors take a constructive approach. Even if they have their own position on certain issues, they trust the vision of entrepreneurs and leave the final word to them.

Successful venture capitalists establish governance rules that give startups the opportunity to experiment and drive the company to exponential growth.

Competition and cooperation

Traditional investors often vie with each other for the right to close a deal, and sometimes even clash within the board of directors.

Venture capitalists believe that they can partner with competitors for the benefit of the startup.

Traditional investors rely on their ability to find opportunities that others cannot. Therefore, transactions are concluded in conditions of strict secrecy and bureaucracy, requiring the signing of non-disclosure agreements, letters of intent and other documents. Negotiations usually take place in an aggressive manner to avoid the appearance of "unwanted" players.

Venture investors are also very competitive. However, the industry also has a spirit of collaboration and coexistence. Often, different investors join forces to increase a startup's chances of success. From time to time, you can see that venture capitalists are really proud of the fact that they were able to bring some of their peers to the deal. Moreover, often, to save time and money, no one signs nondisclosure agreements, and paperwork begins already at the stage of the letter of intent.

Competing venture capitalists can partner with each other if it benefits both parties.

They started talking about venture investments in the CIS not so long ago. And even those who are ready to invest in this area are often far from always familiar with the details. Not only investors are interested in the development of venture capital investments, but also, of course, those who wish to receive money for business development.

First, let's define the term. Translated from English " venture" means " venture" or " risky trade». Venture investments Is a type of investment that involves investing in a newly opened business. This type of investment was initially designed for a high percentage of profit.

As you know, direct investments involve a much lower level of profitability and, as a result, the same low level of risk. But if you've taken the risk of getting involved with venture capital investments, total loss of money is not such a myth. Although in return you are promised a high level of profitability: at least 50-100% per annum. Today, you can find a lot of both legal entities and individuals (also called "business angels") engaged only in venture capital investments. It should be noted that if the percentage of risk in venture investments is significantly reduced, then such investments may already be of interest to direct investors.

If we explain the principle of operation of venture capital investments, then imagine the following situation. There is a certain legal entity that has an interesting idea, but does not have the means to put the idea into practice. There is also a "business angel" or venture fund ready to contribute to the implementation of the above idea (if it is a venture fund, then in this case it will play the role of an intermediary). "Angel" acquires a share of the authorized capital or a part of shares, which will be sold in the future. Usually, at the time of the sale of shares, they already significantly increase in price, therefore, the price of the investor's share also increases. The profit of an "angel" (or fund) is, you guessed it, the difference between the sale and purchase price of shares or share capital. By the way, the powerful development of corporations such as Microsoft and Google is due precisely to venture capital investments.

The history of this type of investment in the United States already began more than 60 years ago. Similarly, venture capital investments have proven their effectiveness in many European countries - they bring stable high dividends to investors.

Unlike their Western counterparts, Russian investors are little familiar with venture capital funds, as well as with private equity funds. Our compatriots have been investing in venture capital funds since the early 2000s. The Government of the Russian Federation was prompted by the successful experience of Western colleagues and the need to solve the problem of the significant dependence of the economy on raw materials to the need to introduce venture investment. In 2006, the Russian Venture Company LLC was founded, the goal of which is to invest in Russian venture capital funds. At the same time, the Russian Direct Venture Investment Association or RAWI was founded, which should develop investment funds in Russia, as well as organize the Russian Venture Forum and venture fairs. Today, venture investments in the Russian Federation are gaining momentum, and the growth of venture funds is observed. Now this is no longer a rare occurrence.

Basically, venture capital investments can be interpreted as financing a business with attractive opportunities, but not yet entrenched on the stock exchange. There are developers of an interesting business idea, but the authors do not have sufficient funds to implement it. This is where venture investing comes in.

It's pretty simple. You have the funds that you give to the entrepreneur to implement his idea. In this case, you, and perhaps not you alone, become the joint owner of the business project together with other venture capital investors. What share of the income will be received by investors - this is negotiated when signing the contract. You, as an investor, acquire a stake in a promising startup. With a positive development of the case, you will clearly be pleased with the results.

Venture Capital Facts You Need to Know

The leader in terms of investment in venture capital projects is the United States. About $ 20-30 billion is invested there annually. It is worth noting that the legislative framework of the states also contributes to this development.
So far, not a single country in the world has been able to even come close to the indicators of the United States in this indicator. For example, even if we add together the volumes of venture capital investments in Australia, Israel, Hong Kong, and the UK, we get a figure of about $ 15 billion.
Unfortunately, it is not yet possible to make an objective assessment of Russian venture investments, since our venture capital is significantly intertwined with offshore accounts.
Alibaba can be called the most successful venture capital project to date. Chinese teacher Jack Ma once decided to create a kind of intermediary company that acts as a link between buyers and sellers. And although the superficial similarities between Alibaba and peers such as eBay and Amazon seem to be observed, Alibaba still has significant differences. In particular, this service offers only Chinese goods, prices for them are fixed, no auctions are held. The first investors in Jack Ma's startup were his friends, and they were clearly satisfied with the investment, because in 2015 alone, the company's profit amounted to $ 77 billion, which is slightly higher than the profit of American peers.
However, Chinese companies still find it difficult to compete with American ones. An open and successful venture capital company must initially place its shares in the public domain on the stock exchange. In the media, this is called an IPO. Important indicators are the indicators of the share price immediately after the open listing on the exchange and after some time. The difference between prices will serve as an indicator of the success of the project. One of the successful examples is Facebook, which was founded by American Mark Zuckerberg. If during the IPO Facebook was estimated at $ 16 billion, then a little later this figure has already reached the level of $ 104 billion.
Yandex can be called Russian successful venture counterparts. By the way, of the total number of our venture capitalists, only Yandex managed to make its shares publicly available. At the IPO, Yandex's value was $ 8 billion, later it rose to $ 9.8 billion.

Specificity of venture investment

Investment takes place at the moment of opening the project, when the authorized capital is just being formed. It is possible that some of the funds are contributed even before the registration of the organization. So far, investors are looking only at business plans, since it is now impossible to assess practical profitability.
The founder of a startup does not guarantee anything to the investor. In case of failure, the person who invested the money will not be able to claim their money back. In other words, you are responsible for your investments, so it is better to choose projects carefully.
By becoming an investor in a venture project, you acquire a part of it, which is specified in a separate agreement. When a project starts to be profitable, you can count on your share. The amount of this share does not always directly depend on the amount of investment. Sometimes it happens that the founder of a startup invests nothing in his brainchild or invests very little, and the main part of the investment is taken by the investors. However, the investor cannot own more than 50% of the project. In general, it is generally accepted that the author invests his intellectual idea, and the investors - their money.
Although the risks of venture capital investment are high, they generate substantial returns. Some startups allowed investors to multiply their investments several times over in a short time. A high percentage of profit is a significant plus. After all, even one successful investment can cover several unsuccessful ones. Well, if the investor also has the skills to evaluate startups, then it will not be difficult for him to choose a suitable project.
An investor should keep in mind that if he has experience and skills in a similar business, then he has a good chance of participating in the development of a startup or acting as an unofficial consultant to the founders. That is, the relationship between sponsors and the author of the project usually goes beyond the contract, sponsors can submit their ideas, participate in the management of the project, which gives additional efficiency.
It is not necessary to invest in venture startups at the time of its opening. It so happens that the creator has a need for funds already in the process of work. And then you can use lending, both interest-free and with interest. Such a loan must be repaid on time and in full. But the lender must bear in mind that the liability of a venture project is limited by the size of its authorized capital. And if the amount of the debt exceeds the authorized capital, then the creditor will simply remain “in the red”.
In the case of classic investment, an investor may seek to buy a controlling stake in an enterprise or simply a significant part of them. If an investor gets hold of a controlling stake, his vote will be decisive on the board of directors when making important decisions. Having access to partial management of the company, you can build your own career, indirectly influence other projects, etc. However, in venture capital investments, the sponsor does not aim to buy back a controlling stake. He just invests and expects substantial profits. The direct participation of the sponsor in the regulation of the project is stipulated in the contract, that is, under the contract, important decisions can be made both jointly and by the entrepreneur alone. The principle of venture investment presupposes the joint development of an open business.
The sponsor cannot count on dividends from the profit in the first years. The profit is directed to the further development of the undertaking. The division of income is only possible if the business is firmly established in the market. Although, there may be exceptions to this rule.

Pros and cons of venture capital investments

What does venture investing look like from an investor's perspective? How profitable are startups of this type? Venture capital investments have their own advantages and disadvantages. Let's take a look at them.

Benefits for Investors

If the project is successful, the investor makes a substantial profit. There are times when innovative ideas brought sponsors about 1000% in just a few months. If you carefully approach the choice of a project, well, and if at least a little luck accompanies you, then in a short period of time you can become a co-owner of a successful business.
To become a co-owner of even a large share of a business, you do not need to have millions of dollars in your pocket. And there is absolutely no need to choose a large company. It often happens that it is more profitable for an investor to become the owner of 50% of a small startup than 0.03% of a large business.
One of the unshakable advantages of this type of investment is valuable business experience. By investing in a startup, you will receive a lot of useful information that can be useful in the future.

Disadvantages for investors

Investing in a new startup carries a lot of risks. The author of the idea has no obligations to you. And, of course, there is no guarantee of success. And given the ubiquitous competition, there is always a risk of going bankrupt. So if you decide to invest in a venture project, be ready to part with your money (at least morally).
It is no secret that some startups are not entrepreneurs at all, but the most common scammers. To attract gullible investors, they organize spectacular presentations, but after receiving funds, they disappear in an unknown direction. To protect yourself from such crooks, it is advisable to conclude an agreement with an entrepreneur, where the conditions for investment and cooperation are indicated.

Subjects of the venture capital market

In the modern market, there are 5 categories of sponsors who invest in venture projects:

Venture investor

This is the name of a subject wishing to make a private investment in a venture project. The purpose of such an investment is trivial - to make a profit. It should be noted that, as a rule, the sphere of the company's activity does not matter for the investor, and only a well-thought-out business plan is important. The money invested by a venture investor is called venture capital. The amount of venture capital can reach 100% of the amount in which there is a need.

To summarize a little, almost everyone who invests in a risky project can be called a venture investor. But it must be borne in mind that a venture investor is not a business angel. We will talk about the latter below.

Venture investment fund

This is one of the options for a share-based investment fund. The object of investment is venture capital companies. The capital of the fund consists of funds from private investors. The investor gives his money for the management of the fund, but he does not personally take part in the management. As a rule, management companies have a solid reputation, these organizations already have experience in venture investment. One of the positive qualities of such funds is the diversification of investments, because the fund distributes funds over several projects, which reduces risks and increases the likelihood of a positive result.

To get on the investment list of such a fund, a businessman must try very hard: develop a detailed business plan, back it up with economic efficiency and successful examples. As a rule, investment funds are supportive of entrepreneurs who already have successful experience.

So if you are a private investor with not very big money, then a venture investment fund is quite a suitable option, because they accept small amounts, while providing some investment protection.

Large financial structures

They are a conglomerate of several organizations with a single governing body and an extensive field of activity. For example, VTB Group, which includes more than two dozen companies operating in various market directions. Modern conglomerates sometimes engage in venture capital investments, but not as often. To win the favor of such structures, an entrepreneur will have to try to provide a well-designed business plan. But if an investor is successfully attracted, the startup will be able to enlist significant support from these financial structures.

Business angels

This term is somewhat unusual for classical financial science. In the last century, this was the name given to wealthy individuals in Western Europe, who financed the performances from their own funds. Now the term “producer” is used for such people, and business angels are “christened” persons who invest in those areas in which they are well versed, have experience and knowledge. And the size of the profit for business angels is not the most important thing. They are more attracted by the opportunity to show their skills, realize their potential, master something new, and, of course, get moral pleasure from work. As a rule, these are very wealthy people with a good higher education, and they usually invest in high technologies. Thus, this category is significantly different from ordinary venture capital investors.

It should be noted that for a novice businessman, the best sponsor option is just a business angel. Such enthusiasts do not have to convince for a long time, they themselves see the prospects (or not prospects) of the project, and the issue is decided at the next interview. In addition, a business angel will immediately provide you with 100% financing.

State

For the development of a venture startup, sometimes you can get budgetary government funds, but for this, get ready to resist a powerful bureaucracy. Just to participate in the competition, you will have to beat the thresholds of many government agencies. And in the future you will have to live a long time in anticipation: will your idea be recognized as worthy of investment with state money? However, one should not forget about the significant corruption component in such matters. It may well turn out that the winner of the competition will not be the most promising project, but the project, the author of which bribed “the right people”.

Venture investment stages

Venture investment allows investors to achieve various goals: researching the possible introduction of new products on the market; formation of an effective working team; expansion of sales markets and production volumes, etc. The chosen goal will influence the implementation of the main VI strategy - phased investment.

Such a strategy involves dividing the company's development process into specific stages and the subsequent financing of these stages according to a scheme previously agreed with the investor.

In total, 6 stages are distinguished, at the onset of which it is possible to invest in a venture project:

Presowing. The sponsor provides relatively little funding for marketing research, business feasibility studies, or new product development.
Sowing. Sponsoring a more detailed study of the product and the release of an experimental batch.
First. At this stage, they begin to invest in the streaming production of goods, but on condition that the funds from the previous stage have already ended.
Second. Now is the time to invest to increase production and build up stocks of manufactured products.
Third. Even with the successful passage of the previous steps, investors will begin to receive profit only at this stage. The third stage is characterized by an increase in production and sales rates. Investments at this stage are made to improve products and increase production volumes.
Late. In the current period, the enterprise is connected to entering the stock market. The investment in the sixth stage is the largest and the risk is the smallest. But it usually happens that sponsors no longer want to make investments as soon as the shares of their company begin to be sold on the stock exchange.

As you can see, for each stage, it is assumed a certain amount and direction of investments required to achieve intermediate goals.

7 best Russian venture capital funds

Softline Venture Partners. Created in 2008. by the Softline group of companies. The authorized capital is about $ 20 million. It is engaged in investments in projects related to information technology at the early and seed stages of development. This gives noticeable positive results. He has already invested in 13 large projects, an example is the online gift shop Daripodarki.ru. During the first 6 years of its operation, the fund significantly increased, after which it was bought by the French corporation Edenred. The largest investment from Softline Venture Partners is 7 million rubles in the Business Family (offline network).

Russian Ventures. Founder Evgeny Gordeev proclaimed adherence to the principles of flexibility and speed. The fund helps Western companies adapt to the specifics of the Russian market. The date of creation is considered to be 1997; it has been active since 2008. The capital of Russian Ventures is about $ 2.5 million. Sponsored by Okeo, the Ogorod community. The largest investment is in Pluso.ru. They say that a maximum of half an hour is enough for Eugene to make a decision.

ABRT. Founded in 2006. Sponsors firms that develop and sell software. Notable deals include KupiVIP, Acronis, Oktogo.ru. The founders of the fund - A. Baronov and R. Timashev - became known when they sold the Aelita Software they created to the Californian company Quest Software. The latter paid $ 115 million for the purchase. The fund already has significant investment experience, finances projects both at the seed stage and at the growth stage. Moreover, the size of investments for the sowing campaign can reach $ 3 million.

Prostor Capital. It began its existence in 2011. He came out ahead due to a number of reasons: a) sponsors the most famous projects; b) fund specialists are able to identify promising undertakings at the earliest stages of development; c) good conditions plus strong support. Prostor Capital makes high demands on the professionalism of its experts. They have funded projects such as Dnevnik.ru, Car-fin, Vita Portal.

Runa Capital. The founder of the fund, Sergei Belousov, considers it necessary to promote Russian technology companies on the world market. Rune Capital experts are ready to provide you with quality advice. The companies financed by this fund are doing well. And Belousov is sure that good relationships with partners and the human factor are crucial.

Addventure II. A Russian fund that has introduced the practice of investing at different stages of project development. In addition to direct financial assistance, fund partners receive a number of contact information, which serves as an important additional factor. The most famous investment is in the online resource of collective purchases darberry.ru. Similarly, they invested in various sites related to online commerce, as well as in startups developing mobile applications.

RVC. State Fund of the Russian Federation, established in 2009. Invests in projects at the seed stage. Attracts the attention of startups specializing in the latest scientific and technical developments. RVC is also interesting for those innovators who would not like to entrust the management of the company to an investor. However, the fund is distinguished by a rather strong bureaucracy. You also need a venture partner to participate in investment. RVC financed projects such as Wobot, Membrane Technologies, Ceramic Transformers.

Search for a project for venture investment

If you are a beginner in the field of investing, then it will not be easy to choose the right project on your own. Let's consider the possible search options.

Exchanges. The Internet provides each of us with almost limitless search opportunities. A lot of resources have already been opened, where investors can choose the desired startup, and entrepreneurs can offer their ideas. Such sites have received the status of exchanges. An example is inproex.ru.
Joint investments. Some exchanges have gone further and offer the option of making investments directly from their account on the site. You yourself create your own investment portfolio, and then select objects for investment. Such resources are ready to accept funds from electronic wallets.
Friends and acquaintances. Even if you think that there are no people around you who know about venture capital, feel free to ask a friend or acquaintance sometimes. It may well be that such a topic will appeal to the interlocutor, and together you can choose a suitable object for investment.

And in conclusion, we will give examples of projects that brought huge profits to their creators. The cost of the service for smartphones WhatsApp in a few years reached $ 16 billion. The cost of Twitter at the end of 2013. amounted to more than $ 14 billion. The start of the project for the development and implementation of a virtual reality helmet by Oculus fell on August 2012. , and now Facebook is about to buy Oculus for $ 2 billion.

Good day to everyone who gathered in front of the monitors and prepared for the next portion of news from the world of moneymaking! As you remember, I wrote about how risky business is a game in such a financial market as Forex. Today I want to devote my article to an even more risky event, namely, venture capital investments. If you are looking for ways to diversify your funds, then this will be useful and interesting for you. Therefore, I propose right now to find out what venture capital investments are, how to work with them and how not to lose your capital.

What is venture investing

If we turn to the origins and delve into the roots of the origin of the term "Venture", then we learn that translated from English it means nothing more than risk or risk undertaking... Based on this, we can draw a completely logical and logical conclusion that venture investment is an investment associated with high risks.

It seems to me that for a better understanding of this term, it would be very appropriate to compare it with a loan. We all know that the latter is issued to companies without any specific guarantees, for the most part, just under "honestly"... The role of investment objects, as a rule, are young enterprises that are just starting their business activity.

How Ventures Work

It is thanks to venture capital investments that are realized that literally blow up the markets. For clarity, I suggest you decompose this process in the form of an algorithm.

Have young company while still not enough funds, but there are already serious and very ambitious goals to achieve which it needs capital investment. To get the missing resources, she attracts investors to her project.

Those businessmen who are interested in the proposal of the newly-made company allocate the amount necessary to finance the project from their own funds, and in return receive a share in the company. In other words, investors buy their place in the management of the company, become the owners of its shares.

After this, events can develop in two directions:

Due to the fact that this area of investment is highly risky, many venture capital investors decide to engage in project management on their own, relying on their experience and acquired business skills. Such active investors are popularly nicknamed "Business angels".

How Venture Capital Works

So that you understand how venture capital works, I suggest you decide on main distinguishing features that are characteristic of this financial instrument.

Quite high barrier to entry

More often than not, wealthy individuals act as investors in the venture capital market. This is primarily due to the fact that this industry requires injections ranging from 10,000 to several tens of millions of US dollars.
Therefore, as a novice investor with a modest capital, you will have to go through many sites on the Internet, watch hundreds of commercials, re-read a bunch of forums, before you finally find really interesting and accessible project for you requiring investment. If this option does not suit you, then I advise you to contact the institute or who provide such a wonderful service as the opportunity joint investment.

This will allow fund managers to accumulate deposits of several small investors in such a way as to further invest the collected capital in a strong and promising project. The only disadvantage of this option, I think, is that you will have to completely trust the competence and experience of the fund manager, give up the opportunity to independently make decisions about which project to direct your funds to.

Long-term investment

When investing your money in venture projects, you should understand that investment conditions of this kind will not allow you to get your funds back any time you want. This is due to the fact that the entire amount invested in the project is immediately absorbed by the company, and therefore you can return the money spent only when the project begins to generate income. Often, before the receipt of profits and the opportunity to return the invested funds, it passes some years.

Lack of control

If we compare venture capital investors with strategic partners, then such a striking difference as the lack of control over a block of shares in the former catches the eye. That is, these entities are practically not interested in the management of the company itself, they assume exclusively the risks of the financial plan, shifting all other troubles onto the shoulders of top managers.
Of course, in an effort to save their money, some venture investors still sit on the board of directors of the company and are personally involved in overseeing the affairs of the firm. Which, in principle, in my opinion, is quite logical. It is unlikely that any of you will agree to part with huge amounts of money and not worry that at any moment all these funds may simply "burn out".

The impossibility of guaranteeing the profitability of the project

Throughout the entire term of venture lending, you, as a lender, may not receive a single penny of return from the project, but ultimately sell a stake in the company for tens of millions of dollars. The real volumes of profits of most startups can be said only after their shares are publicly placed on stock exchanges. After that, based on the investment attractiveness of the project, it determines the price of its shares, and with it the amount that you can earn for the sale of a stake in the company, being its direct lender.

Venture investment stages

Since any financial investment is a deliberate and balanced measure, investors are extremely careful in choosing where and how to channel their funds. It is for this reason that phased investment model- the strategy of investment in high-tech projects most demanded by venture investors. Its essence lies in strict timing- stages of development of the funded event, weighing and comparing these stages with the key stages of development of the company as a whole, which are preliminarily negotiated with investors and are carried out in the process of their implementation with financing.

Each of the stages has its own individual investment dimensions required in order to achieve the set goals. Total stages 6, and I invite you to talk about each of them in more detail:

On pre-sowing stage there is a allocation of a certain amount of funds (very modest) for a supposedly profitable idea for a clear justification and elaboration of the general concept, marketing research and development of a direct product.
Sowing stage involves funding more in-depth and thorough research, the release of trial batches of the product.
First stage... It is at this stage that the direct development of the business takes place and release of the first commercial batch product.
On second stage, if at the previous stages all the funds raised have already been exhausted, there is a repeated cash injection aimed at increase in production turnover and creating a certain grocery stock.
Only on third stage finally starts receipt of profit... It is this stage that is characterized by continuous and rapid development of the project as a whole and significant increase in sales... Only if both of these requirements are met can a company qualify for new investments required to improve products and increase production.
Late and final stages of development Is direct listing a company on the stock exchange... At this stage, investments are necessary for different purposes and are “fought back” after specific proposals for the purchase or sale of the firm's securities are received on the stock exchange. It is at this stage that investments become the largest in terms of their volume, but at the same time the risk of losses is minimized.

A little about real successes

Let's take a short break and let's rest... To inspire you to invest in the world of venture capital projects, I want to tell you a couple of real stories about how investments in small companies that were never known to anyone gave the world famous and popular brands. So let's find out how venture investments hyped up Whatsapp and Twitter.

Where can an investor look for projects for investment?

If I managed to convince you of the attractiveness of venture capital investment, then it's time to talk about where a beginner can find a project in which to invest? I will list the most available search methods investment objects that I know about:

Summary

In conclusion, I cannot fail to say once again that such investment is associated with huge risks, and therefore I ask you again weigh the pros and cons such an option for earning. Remember that making such decisions requires you to understand the legal side of transactions, consult with specialists who have been working in this area for more than a year. You must clearly understand that only a tenth of investors return their costs and make a profit... But even if that doesn't scare you, then my advice to you is to invest in several projects and diversify your risks. Let's meet here, see you, my dear readers and novice investors!

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