The operation of venture capital includes four stages: financing, investment, management and exit.
Solve the problem of "where does the money come from" in the financing stage. Usually, the sources of venture capital include pension funds, insurance companies, commercial banks, investment banks, large companies, university endowment funds, wealthy individuals and families. In the financing stage, the most important problem is how to solve the arrangement of the rights and obligations of investors and managers and the distribution of interests.
Solve the problem of "where did the money go" in the investment stage. Professional venture capital institutions invest their venture capital in startups with great growth potential through a series of procedures, such as project preliminary screening, due diligence, valuation, negotiation, clause design and investment structure arrangement.
Solve the problem of "value appreciation" in the management stage. Venture capital institutions mainly realize value-added through supervision and services. "Supervision" mainly includes participating in the board of directors of the invested enterprise and replacing the management team members when the performance of the invested enterprise fails to reach the expected goal. "Service" mainly includes helping the invested enterprise to improve its business plan and corporate governance structure, and helping the invested enterprise to obtain follow-up financing. Value-added management is an important aspect that distinguishes venture capital from other investments.
The exit phase solves the problem of "how to realize the benefits". Venture capital institutions mainly withdraw from invested start-ups through IPO, equity transfer, bankruptcy liquidation and other means to realize investment income. After withdrawal, venture capital institutions also need to distribute the investment income to investors who provide venture capital.
The general requirements of venture capitalists for the project are: (1) The project must have a certain scale, which is generally not less than 250,000 US dollars in the United States; (2) The risk is identifiable and predictable; (3) The project business must have the potential of substantial growth in a short period of time; (4) The products and services are unique and competitive; (5) The project enterprise must have great potential to expand sales and gain profits; (6) Venture capital can be withdrawn from the project and realized at a certain point.
When investors decide whether to invest in a project, they should calculate the specific data of the investment value of the project enterprise. The most basic calculation method is "free cash flow method", that is, predicting the future profits that the project enterprise can obtain in cash and discounting them, so as to estimate the investment value of the project enterprise. In addition, there is a "relative ratio method" to predict the investment value of enterprises, that is, according to the ratio of market price to profit, or the ratio of market price to sales. On this basis, considering the risk factors, we decide whether to invest and how much to invest after weighing.