Venture Capitalism, in a nutshell

[Ravi]

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

Could you bring it down to retard level?

 

[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

Could you bring it down to retard level?

I was hoping rdweeb, truffmocker, teapartystupid, joey101 etc would stay out of the grown up thread.

 

[editec]

Being a WRECKING firm that puts down dying companies (like Bains) is NOT venture capitalism.

 

[zonly1]

Somebody wins and somebody lossssses.

Would you like to have A (you've busted your ass for TO BE DUMB DOWN and redistributed to losers in life who will continue to a dependent on society.)?

 

[Wry Catcher]

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.

The rest of the story. Here's James Galbraith on the dangers of predatory capitalism and what to do about it:

Economist's View: James Galbraith: Taming Predatory Capitalism

 

[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.

The rest of the story. Here's James Galbraith on the dangers of predatory capitalism and what to do about it:

Economist's View: James Galbraith: Taming Predatory Capitalism

Depends on how you define 'the rest of the story'. It's the view of a liberal economist. And he's welcome to it. So long as you recognize that his view is his view... an opinion. I was describing the FACTS of venture capital companies. But I can see why you prefer opinion to fact.

 

[California Girl]

Being a WRECKING firm that puts down dying companies (like Bains) is NOT venture capitalism.

The facts do not support your opinion.

Refer to the list of companies that Bains has invested in. Where is the 'wrecking' of those firms?

 

[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.

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

Could you bring it down to retard level?

Venture capital - Invest in small, (hopefully) fast growing businesses. Think investing in Facebook before anyone knew what it was.

Growth capital - Invest in larger, fast growing businesses. Think investing in Staples or Home Depot with 50 stores going to 500 stores.

Buyouts - Take publicly traded companies private by buying them whole. It would be like if Bill Gates wanted to own all of Microsoft for himself so he bought everyone's shares in the stock market.

 

[Toro]

Being a WRECKING firm that puts down dying companies (like Bains) is NOT venture capitalism.

That's right, its not. Bain really wasn't a venture capital firm. Venture capital is more investing in new companies with $0 to $5-$10 million in revenues. Bain was originally a growth capital firm where they invest capital in larger but faster growing companies who use Bain's money to expand. That's where Bain made their name. They then branched into "buyouts," which is often referred to as "private equity." The criticism of buyout companies like Bain is that they buy slower growing companies using a lot of debt. And some of the criticisms are definitely valid. But generally, there is a fair amount of empirical evidence that this type of investment makes companies better and more profitable.

 

[Truthmatters]

Corporate Raider Definition | Investopedia

 

[Ravi]

Being a WRECKING firm that puts down dying companies (like Bains) is NOT venture capitalism.

That's right, its not. Bain really wasn't a venture capital firm. Venture capital is more investing in new companies with $0 to $5-$10 million in revenues. Bain was originally a growth capital firm where they invest capital in larger but faster growing companies who use Bain's money to expand. That's where Bain made their name. They then branched into "buyouts," which is often referred to as "private equity." The criticism of buyout companies like Bain is that they buy slower growing companies using a lot of debt. And some of the criticisms are definitely valid. But generally, there is a fair amount of empirical evidence that this type of investment makes companies better and more profitable.

Yes, but does it make the country as a whole better? So far I haven't seen evidence of that.

Not of course that it is the duty of business to make the country better.

 

[Ravi]

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

Could you bring it down to retard level?

Venture capital - Invest in small, (hopefully) fast growing businesses. Think investing in Facebook before anyone knew what it was.

Growth capital - Invest in larger, fast growing businesses. Think investing in Staples or Home Depot with 50 stores going to 500 stores.

Buyouts - Take publicly traded companies private by buying them whole. It would be like if Bill Gates wanted to own all of Microsoft for himself so he bought everyone's shares in the stock market.

Thanks, I was being facetious but those are good definitions.

 

[Truthmatters]

Corporations only reason to exsist is to make profit.

Its why real live people have to make laws to keep their profit obsession from ruining this country for anyone who wants to have a normal life.

 

[Toro]

Yes, but does it make the country as a whole better? So far I haven't seen evidence of that.

Not of course that it is the duty of business to make the country better.

I get the criticism. There are a lot of valid examples of rapacious buyout investors. But all in all, I'd say yes it does.

Broadly, economic growth is a function of productivity. Productivity rises when companies are more efficient. If companies are more efficient, they are more profitable. Companies like Bain make companies more efficient and profitable.

 

[editec]

Corporate raiders (like Bains) are not venture capitalists.

 

[midcan5]

Yes, but does it make the country as a whole better? So far I haven't seen evidence of that.

Not of course that it is the duty of business to make the country better.

I get the criticism. There are a lot of valid examples of rapacious buyout investors. But all in all, I'd say yes it does.

Broadly, economic growth is a function of productivity. Productivity rises when companies are more efficient. If companies are more efficient, they are more profitable. Companies like Bain make companies more efficient and profitable.

Productivity has risen since forever with only the few benefiting. Let's see some proof Bain accomplished what you say, so far I have seen nothing but the opposite. And whenever someone says we are going to make your company more efficient hold you nose for the crap comes quickly. Been there, seen it, lived it, survived it, etc etc.

 

[Toro]

Yes, but does it make the country as a whole better? So far I haven't seen evidence of that.

Not of course that it is the duty of business to make the country better.

I get the criticism. There are a lot of valid examples of rapacious buyout investors. But all in all, I'd say yes it does.

Broadly, economic growth is a function of productivity. Productivity rises when companies are more efficient. If companies are more efficient, they are more profitable. Companies like Bain make companies more efficient and profitable.

Productivity has risen since forever with only the few benefiting. Let's see some proof Bain accomplished what you say, so far I have seen nothing but the opposite. And whenever someone says we are going to make your company more efficient hold you nose for the crap comes quickly. Been there, seen it, lived it, survived it, etc etc.

You're right that productivity has risen "forever." That's why America is the richest country on earth. But if only a few benefit, then the 99% would still be living like they were in 1810.

 

[driveby]

Corporations only reason to exsist is to make profit.

Its why real live people have to make laws to keep their profit obsession from ruining this country for anyone who wants to have a normal life.

How much profit do you make on the slums you rent to other people? If you had any compassion, you'd let them live there rent free.......

 

[Supposn]

California Girl, my previous post was meant to answer those who find fault with Romney, Bain Capital or the financial industry on the basis that some of their ventures result in profit only for the owners and executives of the venture capital enterprises
I found no fault with you or your initial message of this thread.

We all do what we can to function within our environment and governments’ laws are major factors within financial enterprises’ environments. When Bain Capital maximized their profits regardless of the effects upon all others, it behaved true to its purpose. Bain and Romney should not be faulted for what was essentially driven by governments’ laws.

I’m a proponent of transparent government that respects individual persons and other entities privacy and self-determination, identifies their and the remainder of our societies vulnerability for harming themselves or being harmed by others, protects all from such harm and prohibits such activity that is contrary to our society’s better interests, and is minimal interventionist.
I’m also a proponent of competitive free enterprise, level open markets, ALL nations and USA states sovereignty and equal treatment under law.

Rather than considering these as contrary political positions, I consider them all as valid but it’s not unusual for them to require parsing to determine desirable outcomes. Our goal is minimum inferior and most superior public policies; "We got to accentuate the positive, eliminate the negative”.

A particular criticism of our financial enterprises is their contributions to our nation’s trade deficit.
Refer to my responses to these criticized faults within the topics of:

“Warren Buffett's concept to significantly reduce USA's trade deficit”,
posted @ 08:10 PM, August 30, 2009
last posted @ 06:56 PM, Dec 27, 2011
And
“Trade deficits are ALWAYS detrimental to their nations’ GDPs
posted @ 10:25 AM, November 30, 2011
last posted @ 01:26 PM, December 23, 2011

Respectfully, Supposn

 

[freedombecki]

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

Sad state those OWSers.