Venture Capitalism, in a nutshell

[California Girl]

Given some of the hyperbole and lunacy that's been put forward on USMB about Mitt Romney's background as a venture capitalist, I thought I'd try and give y'all a non-partisan, rational overview of what venture capitalism is, it's benefits, and the downside.

In a nutshell, venture capitalist provide an injection of capital (finance, money, cash, bucks) into a company that has a business need for that capital. It is an alternative to a bank loan. Sometimes companies approach venture capitalists because the bank won't lend, or because they can't get a decent interest rate from a bank. Often it is used to develop a new product, invest in better equipment or technology.

Venture capital companies are also known as private equity companies (although there are some slight differences between the two), or, in the case of an individual venture capitalist, they are often nicknamed 'business angels'.

Most venture capital companies lend in specific markets, in which they have some form of expertise, so by partnering with a venture capital company, the business not only gets an injection of money, it also has access to the venture capitalist's expertise and experience.

Venture capital companies also often invest in high risk start up businesses that banks have refused loans due to the high risk, or companies that are failing - often due more to internal issues, such as incompetent management. In those instances, the venture capital company may remove the management and replace them with more experienced staff.

More often than not, the investment made by the venture capital company benefits the recipient company. The venture capital company owns a share - and makes money, and the recipient reaps their own financial reward.... the workers have jobs, the owner has their profit and everyone is happy.

Once in a while, it does not work and the venture capital company will sell off the assets of the company in order to recoup some or all of its investment. Sometimes they also make a profit on that.

Clearly, the subject is far more complex than I have outlined - but.... that's a basic overview. I hope it helps clarify the benefits - and the downside.

If you want to see 'venture capital' in action, watch the program 'Shark Tank'... that is individual 'venture capital' in a nutshell.

 

[FuelRod]

Right on.
Just a couple of companies that has flourished thanks to Venture Capitalist investments:

Apple
Facebook.

 

[Katzndogz]

Right on.
Just a couple of companies that has flourished thanks to Venture Capitalist investments:

Apple
Facebook.

Staples
Sports Authority

 

[California Girl]

Right on.
Just a couple of companies that has flourished thanks to Venture Capitalist investments:

Apple
Facebook.

Hundreds of thousands of Americans can thank venture capital companies for their jobs.

Naturally, there are 'sharks' in the industry... and naturally, it is not all 'happy clappy' but in the main, venture capital companies provide a great service - and make money doing it. The American way!

 

[Truthmatters]

hump hump hump

guys this countries voters are no longer buying the greed is good meme.

 

[California Girl]

hump hump hump

guys this countries voters are no longer buying the greed is good meme.

Thank you for your intelligent response. It has added significant value to the thread.... by demonstrating, yet again, that you value partisan hackery over rational thought or debate.

 

[Katzndogz]

If you were to pose the question to liberals as to whether an investor is a lender to a company, most liberals would not know that. There should be no investment with expectation of getting a return. It's a gift. Most liberals don't know that an investor is more than a lender, an investor is a secured creditor. Secured by the assets of the company. If the assets are sold off, the secured creditors get paid first. To the liberal, the proceeds of sale should be given to the workers who are losing their jobs.

Liberalism depends on profound ignorance for it's survival.

 

[FuelRod]

Most high tech companies that have changed the world in the last quarter century got their funding from VC's vs. Banks.
Banks tend to be risk adverse and in that innovation adverse.

 

[Truthmatters]

keep humping to protect your money Cali.

it wont translate into votes.

 

[California Girl]

keep humping to protect your money Cali.

it wont translate into votes.

I was hoping that the thread would help to inform those who do not understand the concept of 'venture capital' companies. I'm not surprised that the subject is over your intellectual paygrade.

 

[California Girl]

Most high tech companies that have changed the world in the last quarter century got their funding from VC's vs. Banks.
Banks tend to be risk adverse and in that innovation adverse.

Yep. From my own research - as part of my day job - VCs have had a huge positive impact on the economy of the United States - and many other countries.

 

[Katzndogz]

Koreans use the Gie! That's how come they own so many small businesses. It is basically a fund of start up capital which is paid back with interest. The Gie assumes the risk of failure. Although not many Korean businesses fail. Having no expectation of a right to outcome, they work like sled dogs.

 

[AquaAthena]

Right on.
Just a couple of companies that has flourished thanks to Venture Capitalist investments:

Apple
Facebook.

Hundreds of thousands of Americans can thank venture capital companies for their jobs.

Naturally, there are 'sharks' in the industry... and naturally, it is not all 'happy clappy' but in the main, venture capital companies provide a great service - and make money doing it. The American way!

Most liberals will never accept successful enterprise, nor be grateful for those entreprenuers for whom most of them work, or have worked. Success to them, is to be punished, not rewarded. It is their way, of feeling a sense of personal power, most of them have never achieved...

 

[California Girl]

Right on.
Just a couple of companies that has flourished thanks to Venture Capitalist investments:

Apple
Facebook.

Hundreds of thousands of Americans can thank venture capital companies for their jobs.

Naturally, there are 'sharks' in the industry... and naturally, it is not all 'happy clappy' but in the main, venture capital companies provide a great service - and make money doing it. The American way!

Most liberals will never accept successful enterprise, nor be grateful for those entreprenuers for whom most of them work, or have worked. Success to them, is to be punished, not rewarded. It is their way, of feeling a sense of personal power, most of them have never achieved...

On this we may disagree. I don't believe that 'most liberals' won't accept it. I believe that their left wing fools won't. But most liberals are not fools - and they should and do understand the concept and benefit of successful enterprise.

 

[Uncensored2008]

Without Venture capitalists, the company I work for would be out of business. In 2005, the old owners wanted to cash out. Two ways of doing it, sell us to our customers, which in Aerospace means dissolving the company and selling the techniques, putting 700 people out of work. Or sell us to a venture capital group. Thankfully, the latter was done and we are more successful than any time in history.

 

[California Girl]

Without Venture capitalists, the company I work for would be out of business. In 2005, the old owners wanted to cash out. Two ways of doing it, sell us to our customers, which in Aerospace means dissolving the company and selling the techniques, putting 700 people out of work. Or sell us to a venture capital group. Thankfully, the latter was done and we are more successful than any time in history.

Excellent. A real life example of venture capital at work. I'm glad it worked out for the 700!

 

[Katzndogz]

Even if a liberal does have some understanding the concept and benefit of successful enterprise, they can still be manipulated by avarice.

Having been an employer and been the manager of other businesses, there are very, very few workers who understand successful business practices. VERY few workers see a connection between the work that they do and the health of the company. One of the most difficult aspects of managing any business was convincing the workers that what they did had a direct connection to their paycheck. Mostly it was a game of "How much can I get away with". Followed by complaints because someone made more money than they did. When some secretary or other reminded me that as the owner I made far more money than she did, I never failed to offer a week's exchange. She could do what I did, and get whatever money I would have made. I would take her 9-5 and get her salary. With the same caveat that I had. If there was no income for that week, she would have to pay me my salary out of her own pocket, the same way I had to do for her.

Funny, no one ever wanted to take me up on it. I guess working 18 hours a day was objectionable. Making those decisions rather than walking out the door wasn't for her.

 

[California Girl]

Even if a liberal does have some understanding the concept and benefit of successful enterprise, they can still be manipulated by avarice.

Having been an employer and been the manager of other businesses, there are very, very few workers who understand successful business practices. VERY few workers see a connection between the work that they do and the health of the company. One of the most difficult aspects of managing any business was convincing the workers that what they did had a direct connection to their paycheck. Mostly it was a game of "How much can I get away with". Followed by complaints because someone made more money than they did. When some secretary or other reminded me that as the owner I made far more money than she did, I never failed to offer a week's exchange. She could do what I did, and get whatever money I would have made. I would take her 9-5 and get her salary. With the same caveat that I had. If there was no income for that week, she would have to pay me my salary out of her own pocket, the same way I had to do for her.

Funny, no one ever wanted to take me up on it. I guess working 18 hours a day was objectionable. Making those decisions rather than walking out the door wasn't for her.

You keep trying - along with the idiot TruthMocker - to make this a partisan issue. You do realize that there are many liberals who are venture capitalists, right? It is not a fucking partisan issue. It is just fucking business. Nothing more, nothing less. Engage the rational side of your brain - if you can find it.

 

[Uncensored2008]

You keep trying - along with the idiot TruthMocker - to make this a partisan issue. You do realize that there are many liberals who are venture capitalists, right? It is not a fucking partisan issue. It is just fucking business. Nothing more, nothing less. Engage the rational side of your brain - if you can find it.

???

I'm not sure you're right. The DNC has targeted the financial sector, and particularly VC firms to be the scapegoats in the demagoguery campaign being waged. It looks like a pretty partisan issue to me.

 

[California Girl]

You keep trying - along with the idiot TruthMocker - to make this a partisan issue. You do realize that there are many liberals who are venture capitalists, right? It is not a fucking partisan issue. It is just fucking business. Nothing more, nothing less. Engage the rational side of your brain - if you can find it.

???

I'm not sure you're right. The DNC has targeted the financial sector, and particularly VC firms to be the scapegoats in the demagoguery campaign being waged. It looks like a pretty partisan issue to me.

Well, then, they have some serious internal issues. Because there are several Democrat supporters who are well known 'business angels'. It's not partisan - and this thread is not about partisan bitching. I am trying to provide an honest, easy to read overview of VCs and the like.