The concept and operation mechanism of 1) VC
VC(Venture Capital), also known as "venture capital", refers to a kind of equity capital invested by professional financiers in emerging, rapidly developing and fiercely competitive enterprises. It is an investment in the production and operation of technology-intensive innovative products or services based on high technology and knowledge.
Venture capital is to invest venture capital in the early stage of the development of venture enterprises. After its development is relatively mature, the invested capital will be converted from equity form to capital form through the market exit mechanism to recover the investment. The operation process of venture capital is divided into financing process, investment process and exit process.
2) the role of venture capital
Venture capital is an incubator for enterprise growth and transformation of scientific and technological achievements. Mainly manifested in:
A) Financing function: Venture capital provides much-needed funds for innovative enterprises and ensures the continuity of venture capital.
B) Resource allocation function: The venture capital market has a strong evaluation, selection and supervision mechanism, and the economic value of industrial development can be fairly evaluated and confirmed through the market, so as to realize the survival of the fittest and improve the efficiency of resource allocation.
C) Function of property rights flow: Venture capital market provides efficient and low-cost conversion mechanism and flexible merger and acquisition methods for the property rights flow and reorganization of innovative enterprises, promotes the optimal combination of assets of innovative enterprises, and makes assets have sufficient liquidity and investment value.
D) risk pricing function. Risk pricing refers to the determination of the price of risky assets, which reflects a functional relationship between future returns and risks brought by capital assets. Investors can refer to the prices of various assets provided by the venture capital market and make investment choices according to their personal risk preferences and personal future expectations. It is through this function that the venture capital market plays the role of accumulation and allocation of capital resources.
Venture capital market is the market for cultivating innovative enterprises, and it is the incubator and growth cradle of innovative enterprises. Venture capital is a catalyst for optimizing the combination of production factors in existing enterprises and transforming science and technology into productivity. Venture capital is different from traditional investment methods. It integrates financial services, management services and marketing services. Venture capital institutions provide financing services for enterprises from incubation, development to growth. Venture capital not only brings development funds to enterprises in seed stage and expansion stage, but also brings advanced foreign entrepreneurial ideas and enterprise management models to help enterprises solve various entrepreneurial problems and enable many small and medium-sized enterprises to develop by leaps and bounds.
2. angel investment
1) The concept of angel investment
Angel investment means that individuals contribute money to help entrepreneurs who have special skills or unique ideas but lack their own funds to start a business, and bear high risks in starting a business and enjoy high returns after success. Or a one-time upfront investment made by free investors or informal venture capital institutions to an original project idea or a small start-up. This is a kind of venture capital. And "angels" usually refer to investors who invest in very young companies and help them get started quickly.
2) The main characteristics of angel investment
As a kind of venture capital, angel investment has its own characteristics. Mainly:
A) The amount of funds is generally small, and it is a one-time investment. Investors do not participate in management, and their audit of venture enterprises is not strict. It is more based on investors' subjective judgment or personal likes and dislikes. Usually angel investment is invested by one person, and it will be closed when it is ready. This is a personal or small business activity.
B) Many angel investors are entrepreneurs themselves and understand the difficulties faced by entrepreneurs. Angel investors are the best financing targets for startups.
C) They are not necessarily millionaires or high-income people. Angel investors may be your neighbors, family, friends, company partners, suppliers or anyone who is willing to invest in the company.
D) angel investors can not only bring money, but also bring contacts. If it is a celebrity, it can also enhance the credibility of the company.
3) The main source of angel capital
Former entrepreneur; Rich people in the traditional sense; Senior managers of large high-tech companies or multinational companies
4) Typical representatives of angel investors
Zhejiang businessmen, Soviet businessmen and other businessmen in developed coastal areas.
3. Private equity investment
1) PE concept and operation mechanism
PE (Private Equity) Private equity investment is equity investment in unlisted enterprises through private placement. In the process of transaction implementation, the future exit mechanism is considered, that is, through listing, mergers and acquisitions or management buyback, the shares are sold for profit. Broadly speaking, PE invests in enterprises in seed stage, initial stage, development stage, expansion stage and maturity stage.
In a narrow sense, PE mainly refers to the private equity investment part of mature enterprises that have formed a certain scale and generated stable cash flow, mainly refers to the private equity investment part in the later stage of venture capital, in which M&A funds and mezzanine capital account for the largest part of capital scale. M&A Fund is a fund that focuses on M&A, the target enterprise. Its investment method is to acquire the control right of the target enterprise by acquiring the equity of the target enterprise, and then sell it after a certain period of restructuring and transformation. The difference between M&A fund and other types of investment is that venture capital mainly invests in entrepreneurial enterprises, and M&A fund chooses mature enterprises; Other private equity investments are not interested in corporate control, while M&A funds want to gain control of the target enterprise. M&A funds often appear in MBO and MBI.
2) the role of private equity investment
Private equity investment fund is a force to promote the sustainable development of capital market. The rapid development of private equity fund industry will provide a new way to improve the rate of return of the financial industry, and also provide an effective way to solve the financial difficulties of private small enterprises, and open up the demand for profit-seeking of industrial and financial capital.
4. Analyze the relationship among venture capital, angel investment and private equity investment.
Angel investment is a kind of venture capital. Generally speaking, the amount of venture capital investment is large, and it is put into management at the same time, and will gradually increase investment with the development of the invested enterprises. Angel investment generally invests a small amount of money, which is a one-time investment and does not participate in the direct management of enterprises. The choice of investment enterprises is more based on investors' subjective judgments and even preferences.
Although PE and VC are both investments in pre-listed enterprises, they are quite different in investment stage, investment scale, investment concept and investment characteristics. A simple method to distinguish VC from PE: VC mainly invests in the early stage of the enterprise, while PE mainly invests in the late stage. Of course, the division of early stage and late stage makes VC and PE different in investment concept and scale. PE invests in enterprises in seed stage, initial stage, development stage, expansion stage, maturity stage and Pre-IPO stage, so PE in a broad sense includes VC.
In the fierce market competition, the business penetration of VC and PE is getting higher and higher. At present, many traditional VC institutions are involved in PE business, and many institutions that are traditionally considered to specialize in PE business are also involved in VC projects, which means that PE and VC are only a conceptual distinction, and the boundary between them is becoming more and more blurred in actual business. For example, Carlyle and other well-known PE institutions have also set foot in VC business, and their investment in Ctrip. Com and Crowd Media are VC investments.