Venture Capitalism, in a nutshell

[Toro]

It should be noted that even though venture capital firms are also "private equity," there is a distinction. Generally, venture capital is for start-ups and early stage financing. They help companies get off the ground. In the life cycle of a company, they invest at or near the beginning.

There are two other broad classifications of "private equity" also - "growth capital" and "buyouts."

"Growth capital" is used for companies that have grown beyond early stage financing and are still in a fairly robust stage but need capital to expand. "Buyouts" are generally for more mature and often larger companies. The companies are often slower growing but throw off a lot of cash and are often purchased with debt. When people criticize Bain for their business practices, they mean "buyouts," though "private equity" is often used interchangeably with "buyouts."

Some have made the argument that private equity (buyout) firms always or usually buy declining firms. That is not really correct. Private equity instead usually buys companies that are laggards in their industries and/or through off a lot of cash and don't have a lot of debt on their balance sheets. For example, one of the biggest buyouts has been Hilton Hotels which is a strong brand and not in decline but the buyer - Blackstone - thought they could make more profitable by making operations more efficient while using debt to finance the transaction.

 

[California Girl]

It should be noted that even though venture capital firms are also "private equity," there is a distinction. Generally, venture capital is for start-ups and early stage financing. They help companies get off the ground. In the life cycle of a company, they invest at or near the beginning.

There are two other broad classifications of "private equity" also - "growth capital" and "buyouts."

"Growth capital" is used for companies that have grown beyond early stage financing and are still in a fairly robust stage but need capital to expand. "Buyouts" are generally for more mature and often larger companies. The companies are often slower growing but throw off a lot of cash and are often purchased with debt. When people criticize Bain for their business practices, they mean "buyouts," though "private equity" is often used interchangeably with "buyouts."

Some have made the argument that private equity (buyout) firms always or usually buy declining firms. That is not really correct. Private equity instead usually buys companies that are laggards in their industries and/or through off a lot of cash and don't have a lot of debt on their balance sheets. For example, one of the biggest buyouts has been Hilton Hotels which is a strong brand and not in decline but the buyer - Blackstone - thought they could make more profitable by making operations more efficient while using debt to finance the transaction.

I did say there are differences, but I figured it was easier to digest the way I outlined it. I was trying to make it 'accessible' for those who are not very familiar with quite complex information.

I may have dumbed it down a tad too far. LOL

 

[Toro]

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.

CA Senator Dianne Fienstein (D) is married to one of the country's foremost private equity investors, Richard Blum of Blum Capital.

 

[Toro]

Many venture capitalists - in the true sense of the word - are liberal Democrats.

The venture capital industry is primarily located in northern California and the Boston area, though there is some in New York City. Those areas tend to be heavily Democrat.

 

[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.

CA Senator Dianne Fienstein (D) is married to one of the country's foremost private equity investors, Richard Blum of Blum Capital.

Yep. I was saving that little snippet for later use. It's classic! The left are eating their own in their haste to destroy Romney. Cool!

 

[California Girl]

Many venture capitalists - in the true sense of the word - are liberal Democrats.

The venture capital industry is primarily located in northern California and the Boston area, though there is some in New York City. Those areas tend to be heavily Democrat.

I have always kind of viewed them as old school 'Classical Liberals'.

 

[Uncensored2008]

I have always kind of viewed them as old school 'Classical Liberals'.

I would say "Roosevelt Liberals" would be a better descriptor. "Classical Liberal" harkens Tom Jefferson, who Ron Paul has a lot in common with, but Feinstein has nothing in common with.

 

[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.

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 must say that your initial analysis was excellent. This is a partisan issue nonetheless. To democrats only republican venture capitalism is bad. Democrat venture capitalisim is good. That makes business a partisan issue. Workers unite and rise up against the greedy capitalists is coming expressly from democrats who have an ignorant mass to exploit.

 

[FuelRod]

The extreme far left is too dense to recognize the irony of the OWS crowd tweeting about their rally's from their I-phones.

 

[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.

I must say that your initial analysis was excellent. This is a partisan issue nonetheless. To democrats only republican venture capitalism is bad. Democrat venture capitalisim is good. That makes business a partisan issue. Workers unite and rise up against the greedy capitalists is coming expressly from democrats who have an ignorant mass to exploit.

Maybe I'm just naive and hoping that Liberals generally will understand the value of VCs.

 

[Katzndogz]

Even if they understand, it wouldn't make a difference.

 

[California Girl]

Even if they understand, it wouldn't make a difference.

Maybe. But we should at least try to find a common ground, rational, approach.

What bothers me is that people do not seem to understand what VCs do - not just on this forum but across the media too. Unless they are deliberately using a perfectly legitimate - and hugely valuable - business service as a stick just because they dislike Romney.

 

[Jarhead]

A VC firm seeks out good ideas with failed business models. It doesnt simply inject capital...it finds what the problem was, makes the necessary adjustments, and then injects capital to allow it to grow in the right direction.

If a bank denies a loan it is likely due to a poor business model...and banks are not in the business of fixing business models...so they deny the loan...>VC firms take it to the next level.

 

[California Girl]

A VC firm seeks out good ideas with failed business models. It doesnt simply inject capital...it finds what the problem was, makes the necessary adjustments, and then injects capital to allow it to grow in the right direction.

If a bank denies a loan it is likely due to a poor business model...and banks are not in the business of fixing business models...so they deny the loan...>VC firms take it to the next level.

This is an excellent point and I should have included it in the OP. My bad.

 

[Uncensored2008]

Maybe I'm just naive and hoping that Liberals generally will understand the value of VCs.

I think your just too desirous to gain the approval of Jilly, Rati and other forum lefties.

You have a lot of integrity and are generally sensible, but you seem to fear offending the left a great deal.

 

[California Girl]

Maybe I'm just naive and hoping that Liberals generally will understand the value of VCs.

I think your just too desirous to gain the approval of Jilly, Rati and other forum lefties.

You have a lot of integrity and are generally sensible, but you seem to fear offending the left a great deal.

You're shitting me, right? Have you seen the way Ravi and I have locked horns on this forum? You should have - it's happened plenty of times. Likewise with Jillian. What I won't do is just dismiss their opinions because they are liberals - with both, I can lock horns, disagree and argue with... and remain friends. I have no 'fear' of either of them. They are both grown up enough not to take political views too seriously. That is as it should be.

 

[derk]

Hats.. and at the present they are dwindling as an alternative source of finance.

The Fundraising Side

Venture capitalists’ money doesn’t generally come from the VCs themselves, but from LPs who invest with the goal of earning greater returns than alternative investments provide. Because returns from venture capital investments have lagged returns from other classes of investments in recent years, LPs have been reallocating their money away from venture capital. As a result, VCs aren’t able to raise as much money as they used to.

Banks and other debt providers aren’t a substitute either. They will run afoul of usury laws if they charge the interest rates necessary to generate the rate of return expected for investments in the risky young companies that venture capitalists put their money in.


Unless the types of high growth entrepreneurs who got venture capital financing in a previous era, but won’t in today’s market, figure out a way to grow fast without venture capital, the shrinking venture capital industry is a problem for the future of high growth entrepreneurship in the United States.

This is my main issue with trade and American politicopreneurs like Mitt Romney the father of government ran health care. They fail to put America first instead they continue the march to move economic resources out of America. Whether you believe in the warfare of economics or not the United States is losing the battle to control its own Economic Security. Instead relying on foreign nations to supply us with the capital for private enterprise. Soon the stimuli's from the government will meet with stagnation , because the revenue won't be there to support it either. The one issue I think allot of us have overlooked is that the capital and the profits are staying where they are used in the countrys that are supplying the goods an services. Primarily China and other lower wage countrys.

 

[Synthaholic]

Mitt-Love is so much fun to watch!

Why are you all so excited about a RINO?

What happened to "NO MORE McCAINS!!1!!"

 

[Synthaholic]

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 must say that your initial analysis was excellent. This is a partisan issue nonetheless. To democrats only republican venture capitalism is bad. Democrat venture capitalisim is good. That makes business a partisan issue. Workers unite and rise up against the greedy capitalists is coming expressly from democrats who have an ignorant mass to exploit.

Maybe I'm just naive and hoping that Liberals generally will understand the value of VCs.

Sure we do.

VC isn't the issue.

Wealth creation isn't the issue.

Job creation is the issue.

Willard Romney has no job creation experience.

The current problem is no jobs, because there is no demand, because people aren't spending, because of uncertainty.

The current problem is not that we have a bunch of badly run companies that need cannibalizing, spun off, and sold.

 

[California Girl]

Hats.. and at the present they are dwindling as an alternative source of finance.

The Fundraising Side

Venture capitalists’ money doesn’t generally come from the VCs themselves, but from LPs who invest with the goal of earning greater returns than alternative investments provide. Because returns from venture capital investments have lagged returns from other classes of investments in recent years, LPs have been reallocating their money away from venture capital. As a result, VCs aren’t able to raise as much money as they used to.

Banks and other debt providers aren’t a substitute either. They will run afoul of usury laws if they charge the interest rates necessary to generate the rate of return expected for investments in the risky young companies that venture capitalists put their money in.


Unless the types of high growth entrepreneurs who got venture capital financing in a previous era, but won’t in today’s market, figure out a way to grow fast without venture capital, the shrinking venture capital industry is a problem for the future of high growth entrepreneurship in the United States.

This is my main issue with trade and American politicopreneurs like Mitt Romney the father of government ran health care. They fail to put America first instead they continue the march to move economic resources out of America. Whether you believe in the warfare of economics or not the United States is losing the battle to control its own Economic Security. Instead relying on foreign nations to supply us with the capital for private enterprise. Soon the stimuli's from the government will meet with stagnation , because the revenue won't be there to support it either. The one issue I think allot of us have overlooked is that the capital and the profits are staying where they are used in the countrys that are supplying the goods an services. Primarily China and other lower wage countrys.

Cutting and pasting chunks of text might make you look smart, but it is against the rules of the board... it being plagiarism and all that.

Let me know when you can think all by yourself and maybe I'll engage with you again. Maybe not.