Advantages And Disadvantages Of Venture Capital Funds

Advantages And Disadvantages Of Venture Capital Funds
VCs – Who they are, who they fund in India.
Venture capital, as we use the term, refers to one type of private equity investing. Private equity
investments are investments by institutions or wealthy individuals in both publicly quoted and
privately held companies. Private equity investors are more actively involved in managing their
portfolio companies than regular, passive retail investors. The main types of financing included in
private equity investing are venture capital and management and leveraged buyouts.
Venture Capital Funding Process
Venture Capital financing is usually a five–phased process, and may get extended subject to the
performance of the venture being funded. These five commonly found stages are as below:
1. The Seed Stage
In most cases seed–stage financings are small amounts of first ... Show more content on
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There is exchange of information through multiple phone calls, emails, interviews, product and
business strategy assessment, etc.
Step 4 – Term Sheets and Funding
Upon successful completion of due diligence, the VC hands over a Term sheet to the entrepreneurs.
This document lays down the details of the basic terms and condition of the agreement between the
two parties. Once the legalities of the document are completed, the funds are made available to the
firm.
The determinants of venture capital funding
Venture capital has been the driving force behind some of the most vibrant sectors of the US
economy over the past two decades. Venture capitalists were instrumental in fostering the
tremendous growth of firms such as Microsoft, Compaq, Oracle, and Sun Microsystems, which
were all founded less than 20 years ago, but have rapidly become dominant players in the high
technology arena. While the contributions venture capital makes to the economy overall are
underexplored, there exists a widespread belief that
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Yale Case
9–812–062 OCTOBER 18, 2011 JOSH LERNER ANN LEAMON Yale University Investments
Office: February 2011 "...anointing winners and losers on the basis of 12 months' worth of
performance is silly in the context of portfolios that are being managed with incredibly long time
horizons." – David F. Swensen, Chief Investment Officer, Yale University1 On a February afternoon
in 2011, David Swensen, Chief Investment Officer of Yale University, stared out his window at the
snow blanketing the city of New Haven. He was considering the roster for the Investments Office's
2011 softball team, which would be defending its first–ever Yale University championship. It was
nice to imagine the warmth of summer. Swensen and the Investments Office had ... Show more
content on Helpwriting.net ...
The creation of a formal endowment for Yale was triggered by the 1818 disestablishment of
Congregationalism as Connecticut's state religion. Students and alumni alike demanded that the
school respond by establishing a divinity school to offer theological instruction. To fund this effort,
numerous alumni made large gifts, the first in a series of successful fund drives. While Yale used
many of these donations to buy land and construct buildings, other funds were invested in corporate
and railroad bonds, as well as equities. By the century's end, the endowment had reached $5 million.
The growth of the endowment accelerated during the first three decades of the twentieth century,
due both to several enormous bequests and to aggressive investments in equities, which represented
well over half the endowment's portfolio during the Roaring Twenties. In 1930, equities were 42%
of the Yale endowment; the average university had only 11.5%.3 Yale avoided severe erosion of its
endowment during the Great Depression in the 1930s, however, because many recent bequests were
kept in cash or Treasuries rather than being invested in equities. In the late 1930s, Treasurer
Laurence Tighe decided that the share of equities in Yale's portfolio should be dramatically reduced.
Tighe argued that higher taxes were likely to expropriate any corporate profits that equity holders
would otherwise receive even if a recovery did occur. He concluded that bonds would

Yale University Investment Office 2006
Summary:
The Case is about the decision of the Yale Investments Office whether to continue to allocate the
bulk of the university 's endowment to illiquid investments––hedge funds, private equity, real estate,
and so forth. Important is to consider the risks and benefits of a different asset allocation strategy.
Before the choice between different subclasses, e.g., between venture capital and leveraged buyout
funds would be analyzed it is advantageous to get first background information. Effective
management of a university endowment requires balancing fundamentally competing objectives. On
the one hand, the University requires immediate proceeds to support the current generation of
scholars. On the other hand, investment managers must ... Show more content on Helpwriting.net ...
Because rarely asset management business had good incentive alignments built into typical client–
manager relationships. It is necessary for Investment Office to construct good innovative
relationships and fee structures with various external managers to consist the manager interests with
Yale's.
Yale´s Investment Committee annually reviewed its endowment portfolio. For the choice between
different asset classes we will consider the actual allocations in 2006.
Domestic Equity Foreign equity Bonds Cash Real Assets Private Equity Abs. Return Others
Asset Allocation of Yale Endowment 2005: 14,1% 2006* 12,0% 2005: 13.7 2006: 15.0 2005: 4.9
2006:4.0 2005:1.92006: 0.0 2005: 25.02006:27.0 2005:14.82006:17.0 2005:25.72006:25.0 Asset
Allocation of large Universities Endowments 2005:24,5% 2005:17.4 2005:16.2 20051.1: 2005:10.7
2005:9.3 2005:19.9 2005:0.8
Asset Allocation of all Universities Endowments 2005:45,8% 2005:12.7 2005:21.5 20053.5:
2005:3.9 2005:2.4 2005:8.7 2005:1.4
Trend (exp.)* down up down down up up up down
*2006 (current Target allocation)*Considered only the last 2–3 years
The consideration of the expected returns and risks from its current allocation and compared them
with those of past Yale allocations and the current mean allocation of other universities reflected the
need of university to diversify its holdings.In August 2006, Swensen and Takahashi believed that
they probably wanted to

Private Equity Investment
Private Equity (PE) investment is an asset class that is bought and sold in a privately negotiated
transaction and is not publicly traded on a stock exchange. This investment is normally completed
by private equity firm, venture capital firm, or an informal investor named business angel. They
raise funds and invest it on behalf of their investors. There are four most well–known investment
strategies, i.e. venture capital (VC), leveraged buy–out (LBO), mezzanine debt and distressed debt
investments. It is distinguishable that VC usually targets the start–up firms while LBO purchases
majority control in a developed and mature firm. The total global PE assets under management
(AUM) in 2013 has climbed up to $3,466 billion, the highest value to date and has remained a
steadily growth throughout the past 6 years after financial crisis (Appendix figure 1). This is
partially attributed to a sharp decline of exit activity resulted from crisis, led to more capital calls,
improved fundraising and thus expansion of AUM.
Between 1990 and 2008, capital committed in PE were growing at 20% compounding rate annually,
with some acquired firms have become popular due to the popularity of PE, such as Domino's Pizza
and Toys "R". However, following the financial crisis in 2008, the private equity industry has been
confronting momentous challenges yet continuous to recover with signs of performance rebounding.
It has been proved to outperform the public market over the long term. While it is

Dodd Frank Reform And Consumer Protection Act
Dodd–Frank
The full name of the bill is the Dodd–Frank Wall Street Reform and Consumer Protection Act, but it
is mostly known as Dodd–Frank. The Dodd–Frank Act is a United States federal law, which is
divided into sixteen titles that places major regulations on the financial industry with the purpose of
restraining another major financial market collapse. The stated aim of the legislation is: "To promote
the financial stability of the United States by improving accountability and transparency in the
financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to
protect consumers from abusive financial services practices, and for other purposes" (Thomas,
2010).
Due to the Great Recession of the late ... Show more content on Helpwriting.net ...
The Office of Financial Research is designed to support the Financial Stability Oversight Council in
range of researching and collecting data. The Director has supreme power and may require any
financial institution (bank or non–bank) to provide any needed information for reseaching and
analyzing. The Office can also standardize the way financial data is reported, with the constituent
agencies having three years to implement new guidelines.
Investor Protection Measures and Reform "The Act reviews the powers and structure of the
Securities and Exchange Commission (SEC), credit rating organizations, and the relationships
between customers and broker–dealers or investment advisers" (David S. Huntington, Paul, Weiss,
Rifkind, Wharton & Garrison LLP, 2010). It provides corporate governance and executive
compensation reforms, such as proxy access, chairman and CEO disclosures, broker discretionary
voting (Corporate Governance); say–on–pay, say–on–golden parachutes, broker discretionary,
compensation committees, executive compensation claw backs (Executive compensation). In order
to be active and operational, these provisions require further action by the SEC, the stock exchanges
or other regulators except the say–on–pay, say–on–golden parachute and broker discretionary voting
requirements. Most of

How Venture Capital Works : Invention And Innovation Drive...
How Venture Capital Works
Invention and innovation drive the U.S. economy. What's more, they have a powerful grip on the
nation's collective imagination. The popular press is filled with against–all–odds success stories of
Silicon Valley entrepreneurs. In these sagas, the entrepreneur is the modern–day cowboy, roaming
new industrial frontiers much the same way that earlier Americans explored the West. At his side
stands the venture capitalist, a trail–wise sidekick ready to help the hero through all the tight spots–
in exchange, of course, for a piece of the action.
As with most myths, there's some truth to this story. Arthur Rock, Tommy Davis, Tom Perkins,
Eugene Kleiner, and other early venture capitalists are legendary for the parts they played in creating
the modern computer industry. Their investing knowledge and operating experience were as
valuable as their capital. But as the venture capital business has evolved over the past 30 years, the
image of a cowboy with his sidekick has become increasingly outdated. Today's venture capitalists
look more like bankers, and the entrepreneurs they fund look more like M.B.A.'s.
The U.S. venture–capital industry is envied throughout the world as an engine of economic growth.
Although the collective imagination romanticizes the industry, separating the popular myths from
the current realities is crucial to understanding how this important piece of the U.S. economy
operates. For entrepreneurs (and would–be entrepreneurs), such an

NEW FINANCE Essay
For the exclusive use of o. sow
9–810–073
REV: JULY 15, 2013
MATTHEW RHODES–KROPF
JOSH LERNER
ANN LEAMON
Iris Running Crane: December 2009
Iris Running Crane, HBS Class of 2010, shook the rain and soggy snow off her umbrella as she
entered the lobby of Soldiers Field Park on a dark December night in 2009. "Oh the weather outside
is frightful," she whistled as she took the elevator to her apartment.
Back home on the Blackfeet reservation in East Glacier, Montana, the wind would be howling down
from Canada, driving temperatures well below zero. Tonight, though, Iris had more important things
to think about than comparative climatology. Through a combination of preparation, experience,
hard work, and, she admitted, sheer ... Show more content on Helpwriting.net ...
While LBO returns had outpaced those to venture capital during the 1980s, the pattern reversed
itself in the '90s, only to change again in 2000 and in
2007.
Starting in the early 2000s, LBO firms had enjoyed ready access to low–priced debt and had
generated average returns of 15.6% between 2003 and 2006, compared to 9.9% for the Standard &
Poor's index and single digits for VC.3 Accordingly, LPs flocked to invest in LBOs, which raised
$344 billion in 2008, while VC funds raised only $63 billion.4 Records fell for largest LBO deal
(the acquisition of Texas utility TXU by Texas Pacific Group, Kohlberg Kravis Roberts, and
Goldman
Sachs for $45 billion)5 and largest fund raised (Blackstone's $21 billion Corporate Private Equity
Fund
V). In fact, the co–founder of the Carlyle Group lamented, "We should have done every single deal
everywhere in the world [in 2005 and 2006]. Every deal worked."6
VC firms, which had spent the first few years of the 2000s recovering from the telecom and
Internet bubbles, had little to crow about despite such high–profile successes as Google's 2004
initial public offering (IPO). Fundraising recovered from 2002's nadir of $12 billion, but
comparisons to the anomalous activity of 1999 and 2000 made for a sobering return to reality.
Figures for LBO activity in 2008 indicated the peak of a cycle, and the bust followed shortly

thereafter, as the global financial crisis shut off the supply of cheap debt for LBO deals. Such loans
that

Analyst Case Study : Oaktree Capital Group And Apollo...
Analyst Case Study
Investment Thesis
Oaktree Capital Group and Apollo Global Management are large players in the alternative asset
management space that both offer attractive investment strategies. Apollo has a broader scale and
scope than Oaktree, and offers a wider range of private equity products. While these features may be
more attractive to investors, both firms offer unique investment strategies in the distressed
investments space. Thus, either firm may offer a private equity product that best suits the client's
portfolio allocation criteria.
Industry Overview
Oaktree Capital Group and Apollo Global Management are two large publicly–traded U.S.
alternative asset managers. Other large players in the space include Blackstone, the Carlyle Group,
and Ares Management. Favorable market conditions in the U.S. have created a good environment
for harvesting, and despite increasingly elevated market levels, alternative managers have continued
to deploy capital. Given these market conditions, LPs have shifted their focus to GPs that are
currently raising large amounts of capital, rather than firms with large amounts of dry powder to
invest.
On a weighted basis, private equity firms were invested in sectors that appreciated 4.5% in 3Q
compared to 4.3% by S&P 500. Private equity firms are broadly overweight energy, consumer, and
healthcare sectors, while underweight financials and communications sectors compared to the S&P
500. Strong energy returns this quarter have led to

Venture Capital : Investment Capital
Introduction
Venture capital has originated out of the need for non–conventional, high risk finance for new
ventures rooted on innovative entrepreneurship. Venture capital is typically an investment in the
form of equity, quasi–equity and sometimes debt made in novel or untested concepts, championed
by a technically or professionally qualified entrepreneur. Venture capital is risk capital. It refers to
capital investment, both debt and equity, fraught with substantial risk and uncertainties. The risk
anticipated may be very high so that possibilities of high loss exists. However, if successful it can
yield high returns. Venture Capital Definitions
There is no single definition of Venture capital. Jane Koloski Morris, editor of the reputed industry
publication, Venture Economics, describes venture capital as 'providing seed, start–up and first stage
financing ' and also 'funding the expansion of companies that have already demonstrated their
business potential but do not yet have access to the public securities market or to credit oriented
institutional funding sources.
The European Venture Capital Association defines it as risk finance for growth oriented
entrepreneurial companies. It is an investment for the medium or long term seeking to maximize the
return for both the parties. It is a partnership forged with the entrepreneur in which the investor adds
value to the company owing to his knowledge, experience and contact network base.
Meaning of venture capital

Merger
Presentation: Private Equity – part 1. General introduction
Fin205
Jiayue Dai
Chao Yang 1. What is PE?
a. Not quoted on a public exchange.
b. Make investments directly into private companies or conduct buyouts of public companies that
result in a delisting of public equity. Capital for private equity is raised from retail and institutional
investors, and can be used to fund new technologies, expand working capital within an owned
company, make acquisitions, or to strengthen a balance sheet.
c. Commit large sums of money for long periods of time.
d. After buyout, PE will try to improve the financial results and prospects of the company in the
hope of reselling the company to another firm or cashing out via an IPO.
2. ... Show more content on Helpwriting.net ...
Louis, $5.2 billion
– Cornell University, $4.9 billion
– University of Virginia, $4.7 billion
– Rice University $4.4 billion
– Hofstra?
Yale's Investment Strategy:
Since 2008, Yale has increased its allocation toward private equity by almost 15%. Since 1973,
Private equity investments have produced a 30% annualized return to the University.
Why do they choose to invest in private equity? Because Harvard and Yale do it? 1. The
outperformance of the S&P500 over short and long time horizons makes the asset class
especially attractive and helps organization achieve their investment goals. 2. Private equity is
managed by an elite group of specialists. It has little correlation with market risk, which helps
diversify their portfolios.
3. Though it may seem dangerous at first sight due to its illiquid and "risky" nature, private equity
helps provide retirement security to millions, and makes college a reality for more students and
funds charitable causes.
6. IRR
Private equity returns are often reported as the internal rate of

E Commerce : A Great Idea Can Only Get You So Far With...
Starting any business is inherently difficult. A great idea can only get you so far with limited funds.
E–commerce sites face this same struggle. While there is more to beginning startups than simply
fundraising, it will eventually become essential. Luckily, there are many avenues startups can take in
order to raise the funds needed to establish a business, help grow a business, and sometimes even
find new customers and grow a new business' niche audience. All types of investing has risks, pros
and cons. Depending on what startup you are developing, it is important to know your different
funding opportunities. ANGEL INVESTING An angel investor is an individual who provides seed
money for starting a business, or ongoing support to help ... Show more content on Helpwriting.net
...
Angel investors do expect a certain rate of return, but also offer the greatest range in amount of
investment. Again, these can be family members or an investor. Depending on who is investing,
amounts of money or expertise will vary. Keep in mind, whenever you give up part ownership of
your business, you may be fighting over decisions with your investors at later times. VENTURE
CAPITALIST Venture capitals generally invest in startups expecting to see a profit. They are
capitalists and entrepreneurs who tend to be business savvy to some degree. They have deep
pockets, so they can usually invest more than the typical angel investor. Venture capitalists may have
a stronger desire to be part of the consulting and management efforts, which depending on your
investor could be a great asset. Be wary, as this can easily become a hurdle if your investor and you
have different visions for your startup. An investment from a venture capitalist would be perfect for
larger startups or e–commerce sites since investors have more equity to invest. They can also offer
their expertise in guiding your business to a successful and profitable business venture. In fact, may
even decide to bring their other deep–pocketed friends around if they really believe in your
company. An investment from an investment capitalist would be perfect for larger startups or e–
commerce sites since investors have more equity to

The Narrative Of Falling Oil Prices
The narrative of falling oil prices has been played out in financial news as a blessing for consumers
and a bane on the energy sector, namely on oil companies and oil–exporting countries. However, a
crucial piece of the narrative has been largely forgotten, and that's the shock that such oil prices have
had on private equity investors in the energy markets for the past year. What was once a lucrative
and seemingly obvious investment into the oil boom of the post–recession has, for the last year,
turned into an energy fund disaster for many PE firms. Yet despite the record–breaking losses that
these funds have incurred, private equity firms have recently been doubling down in the market,
increasing energy investment to previously unseen levels. Such actions beg the questions: why are
PE firms so confident in the energy sector, and should they be? As the narrative commonly begins,
oil prices are way down. Way way down. In fact, since June 2014, the price of a barrel of oil has
been cut in half reaching levels last seen during the bottom of the 2009 recession. The causes of
such rapid declines are best attributed to a simple supply and demand model. On the supply side,
domestic oil production has doubled in the last six years. As the world's largest crude oil consumer
in the world, the US was once a large and reliable buyer of foreign oil. But with domestic demand
for foreign oil waning, exporting countries such as Saudi Arabia, Nigeria, and Algeria have had to
find new

2016 Presidential Race Picking Up
With the 2016 presidential race picking up, one of the main issues that are being deliberated among
candidates and politicians is the private equity industry and it's and widespread abuse of a tax
loopholes. During the Obama administration, there had already been talks regarding the taxing of
"carried interest", the 20% incentive fee charged by private equity firms, as regular income rather
than capital gains. In spite of the failed effort, politicians from both parties are now aggressively
pushing to close the prominent loopholes enjoyed by fund managers widely. Additionally, private
equity firms are being scrutinized for taking investors' money regardless of whether or not they
allocate the capital into deals. These two major issues from ... Show more content on
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Under current legislation, managers can avoid paying steep income taxes on the 20% incentive fee
in favor of the significantly lower capital gains taxes, thereby saving hundreds of millions of dollars
annually at the expense of the middle–class taxpayer. This is accomplished through for the use of
"management fee waivers" and "carried–interest" tax loopholes that recognizes the 20% incentive
fee portion as capital gains.
*Note, that ordinary income tax rate maxes out at 39.6% while the capital gain tax rate is only
23.8%.
Bipartisan push for Private Equity Tax Reform Class–warfare is a term that is often thrown around
by Republicans to describe any attempt to tax the upper–class, and yet Republicans and Democrats
alike have found common ground when it comes to eliminating the carried–interest tax break.
Recently, President Barack Obama met with Business Roundtable, an association comprising of the
nation's top CEOs, to argue his case for eliminating the prominent tax loophole. He states that the
tax loophole provides no recognizable economic benefit, but instead is causing the middle–class to
suffer financially as a consequence. With the current income disparity levels at record highs, the
financial industry has also become the new target for many 2016 presidential nominees such as
Sanders, Clinton, Bush, and Trump to name a few. So the question that begs to be answered is "will

Investure, Llc, and Smith College
UVA–F–1537 INVESTURE, LLC, AND SMITH COLLEGE In January 2004, Alice Handy's new
investment advisory firm, Investure, LLC, was attempting to land its first client, Smith College, an
elite liberal arts college located in Northampton, Massachusetts with a $913 million endowment.
Handy, fresh from her previous position as chief executive officer of the University of Virginia
Investment Management Company (UVIMCO), had 25 years of experience managing money and a
track record of success. Over her career, Handy had directed increasing amounts of funds to a class
of investments known as "alternative assets," which included a range of investments other than
publicly traded stocks and bonds. She had also developed a philosophy about ... Show more content
on Helpwriting.net ...
She also found herself involved in fundraising efforts when donations to UVa's capital campaign
involved life trusts. During the 1990s, as state support of higher education dwindled, endowment
funds took on increasing importance for UVa and other public universities. Handy's position was
restructured to enable her to dedicate more time to the investment side. The previously "lowkey"
staff and endowment both grew rapidly as Handy's team began conducting proprietary research.
Soon nearly a dozen investment professionals and five accounting and administrative staff members
were managing the endowment. In 2003, after 29 years with the university, Handy determined it was
time for a change. In July of that year, she announced her retirement as chief executive officer of
UVIMCO, leaving behind a healthy endowment and a strong record of performance. UVIMCO's
asset allocation had changed considerably during Handy's tenure, and the endowment had enjoyed
strong performance (Exhibits 1 and 2). UVa's endowment had generated an average annual return of
more than 13% since Handy's arrival and it had grown to almost $2 billion in market value (Exhibit
3). Through her years of service, Handy had developed an extensive list of contacts including
business leaders, asset managers, venture capitalists, and philanthropists.

Strategic Asset Allocation: Determining the Optimal...
Strategic Asset Allocation: Determining the Optimal Portfolio with Ten Asset Classes
Niels Bekkers Mars The Netherlands
Ronald Q. Doeswijk* Robeco The Netherlands
Trevin W. Lam Rabobank The Netherlands
October 2009
Abstract
This study explores which asset classes add value to a traditional portfolio of stocks, bonds and
cash. Next, we determine the optimal weights of all asset classes in the optimal portfolio. This study
adds to the literature by distinguishing ten different investment categories simultaneously in a
mean–variance analysis as well as a market portfolio approach. We also demonstrate how to
combine these two methods. Our results suggest that real estate, commodities and high yield add
most value to the ... Show more content on Helpwriting.net ...
In the remainder of this study we conduct an empirical and literature analysis to establish long–run
capital market expectations for each asset class, which we subsequently use in a mean–variance
analysis. Then, we provide an assessment of the global market portfolio. Finally, we show how the
mean–variance and market portfolio approaches can be combined to determine optimal portfolios.
1
Electronic copy available at: http://ssrn.com/abstract=1368689
2 Methodology and data
Methodology Markowitz (1952, 1956) pioneered the development of a quantitative method that
takes the diversification benefits of portfolio allocation into account. Modern portfolio theory is the
result of his work on portfolio optimization. Ideally, in a mean–variance optimization model, the
complete investment opportunity set, i.e. all assets, should be considered simultaneously. However,
in practice, most investors distinguish between different asset classes within their portfolio–
allocation frameworks. This two–stage model is generally applied by institutional investors,
resulting in a top–down allocation strategy.

In the first part of our analysis, we view the process of asset allocation as a four–step exercise like
Bodie, Kane and Marcus (2005). It consists of choosing the asset classes under consideration,
moving forward to establishing capital market expectations, followed by deriving

The European Private Equity And Venture Capital Association
The European Private Equity and Venture Capital Association (EVCA) released its report on the
investment, divestment and fundraising activity in the Central and Eastern European (CEE) region
last year at the end of last week. The report shows that 2014 was a robust year for the region, while
some differences in private equity and venture capital investment remained in the region.
Investment in the Region
The Central and Eastern Europe Statistics 2014 report found that capital investment by funds
increased in the region by 66%. Total investment from funds in the region stood at €1.3 billion in
2014. This is a good achievement, especially in the light of the whole of Europe, which only
managed to grow investment by 14%.
Furthermore, CEE was able to increase its share of investment. While the region received 2.2% of
the total European private equity investment in 2013, last year the region attracted 3.2% of total
investment. This was mainly influenced by two very large CEE buyout transactions. Together these
two deals accounted for nearly 40%, or €520 million, of the total investment value in the region.
The specific regions that attracted the most private equity investments were Serbia and the Czech
Republic. Serbia accounted for nearly 25% of total investment value, while the Czech Republic
received around 23% of the regional total. These two countries were closely followed by Poland and
Hungary, with the four countries accounting for 80% of all private equity

Regulations Of Capital Investment Products
2. Analyze Regulations in Venture Capital
2.1 In this part, we will put up some typical regulations to analyze whether they are available or
necessary. If possible, we may give some advices to develop these regulations.
BASEL III Requirements and REPO Availability
On Jan 1st, 2014, Basel III regulations show the effectiveness on banks with more than $250B in
total consolidated assets or greater than $10B in foreign exposure. These large banks are important
issuers of repurchase agreements, the capital investment vehicle for the overmuch funds in venture
capital firms. Generally, the US government or a Federal Agency issue or guarantee collateral used
in these transactions, and the agreements reset each day.
In addition, the supply of this high quality collateral has reduced because of the asset purchase plan
of the Federal Reserve. Totally, high–quality collateralizes the availability of repo, low risk
securities may diminish over the near term, resulting in a shift towards lower–quality, higher risk
collateral for longer terms. We might see the development of alternative interest bearing investment
products as a result of this potential shortfall in repo inventory.
Know Your Customers (KYC) and Anti–Money Laundering (AML)
Based on the estimation from the International Monetary Fund, the amount of global money
laundering is approximately 2.1–3.6 trillion a year, accounting for about 3 to 5 percent of global
GDP. Launching regulations and laws related to anti–money

My Time At Plateau Asset Management
Lessons Learned/ Anomalies: Although many analyst internship positions are individually focused, I
found my time at Plateau Asset Management to be more team focused. Therefore, I learned many
lessons regarding team work and communication. Speaking Fast: In the initial Friday group
meetings I found myself never allowing the other analysts to digest the material that I was explain.
Musa pointed this out to me half way through the internship and told me slow down and ask
questions to make sure your listeners understand what you are explaining. This became important
when I began to mentor new inters because it was necessary that they retained the information that I
was explaining during our time together. Listening: Musa believed that I was a good listening,
however that I could improve. Musa stated, "Always listen to respond", when 'listening to respond'
you absorb what the speaker is saying before responding. Working as a Minority: The fact that I was
a minority in the team of 5 analysts did not come to my attention until the end of my internship
period. Musa and I found this strange because a vast majority of the financial industry is Caucasian
males, however even though this internship is in financial industry I was the only white Caucasian
male intern; we furthered our study and found out that I was the only white Caucasian male to even
apply for the position. We thought maybe this was because the internship was virtual. Section 3.
Observations about the

Research Note On Distressed Debt
Research Note on Distressed Debt
Distressed securities are securities of companies or government that are experiencing distress (either
in financial or operational terms), default, or even bankruptcy. In case of debt, this is called
distressed debt. Investing in distressed debt can result in big returns, but the downside is that when a
company goes completely bankrupt, the value of your securities can go to zero.
Distressed debt sells at a very low percentage of par value, for example 30 cents on the dollar. This
percentage indicates that you can buy debt that is worth 1$ at maturity for 30 cents, which seems
very attractive but there is of course a reason that it is only worth 30 cents on the dollar. If the
distressed company emerges as ... Show more content on Helpwriting.net ...
This limits the scope of potential investors to sophisticated individual investors, hedge funds, private
equity firms, vulture funds, and certain investment banks. The majority of distressed debt is bought
by these institutional investors because they have the resources, expertise, and sophisticated risk
management systems to assess the risk of these debt securities.
There are various ways investors can invest in distressed debt. The easiest way is to buy the
distressed debt in the bond market. Because most mutual funds are not allowed to invest in
distressed debt, there is ample supply of debt available shortly after a firm defaults. The second way
is to buy distressed debt directly from a mutual fund, since they have to sell according to their
mandate. These transactions are generally limited to institutional investors since large quantities of
debt, and therefore large quantities of cash, exchange hands. The third and final options is to buy
directly into the distressed firm. This involves working directly with the company to extend its
credit, either in the form of bonds or a revolving line of credit. Distressed companies usually need
significant amounts of cash for a turnaround, so it is common for a consortium of investment banks
and hedge funds to provide this cash to avoid overexposure to one

Landscape Of The Venture Capital Industry
1. Introduction 1.1. Landscape of the venture capital industry Venture capital (VC) refers to financial
intermediary between institutional investors and private companies, often to finance new ventures or
growth of private companies. Venture capital is a subset of the larger private equity industry, which
refers to equity investments in privately–held enterprises. VCs are different from angel investors,
who are often erroneously considered the same as VC, in that VCs rely on raising a pool of capital
from limited partners (LP), and invest on their behalf as general partners (GP), via a limited
partnership that is the actual fund (VC firms often manage several funds). The limited partnership
model define certain characteristics of VC ... Show more content on Helpwriting.net ...
Another important characteristic that separates VC from Angel investors and CVC is the fundraising
process. VC firms need to raise new funds periodically, which increases the pressure to have
positive periodic returns and high–profile investments to assist with future fundraising rounds. The
VC industry itself is divided on the basis of the different stages of investment. Angel investing refers
to individual investors, who are often the first group of investors in a new enterprise, who provide
capital and mentorship. Angel investors invest in companies before VC firms, who invest in the next
round of fundraising, what is often dubbed as Seed Stage, which accounts for about 2% of total VC
investments (NVCA). At the Seed Stage, the portfolio company has just been founded, and its
product is still in development. (NVCA) Clearly, at such an early stage, it is nearly impossible to
make any meaningful financial projections, since the company lacks a product to offer. The next
stage in VC financing is dubbed as "Series A". From an operational standpoint, there are very few
differences between Series A and Seed Stage, since at time of a Series A fundraising, the company's
product may still be in development, (NVCA) or has just been finished to a viable level to allow for
a pilot product launch, testing the market and commercialization potential of the company.
Similarly,

Grove Street Advisors Case Study
Grove Street Advisors Case Study
Grove Street Advisors ("GSA") is a leading fund–of–funds, focused on investing in "low risk" top–
tier private equity funds that are not excessively large nor highly levered. GSA is faced with a
number of strategic alternatives to help catalyze the firm's next stage of growth. We propose that
GSA expand globally and continue to build expertise in relatively underserved global PE markets
such as China and India to help meet its objectives of satisfying customer needs, enhancing its
international reputation, staying responsive to trends in private equity, and ultimately maximizing
profitability.
When considering GSA's strategic direction, we should first build an understanding of its relative
position within the private equity market. GSA's current value proposition to its clients is: 1) Greater
accessibility to private equity firms through GSA's customized services, allowing less sophisticated
clients to progress from a passive fund–of–funds investor into a direct private equity investor,
removing the intermediation between the GP and the client; 2) A strategy of "vintage–year
diversification", whereby GSA contributes to funds over a number of different years in order to gain
access to many different types of funds; and 3) A compensation structure that is weighted towards
carried interest at the expense of fees, ensuring an alignment of interests between GSA and its
clients. These strategies have helped the fund retain large and important

Eco-Products, Inc.
CAPSTONE CASE 1: ECO–PRODUCTS, INC.
End–of–Case Assignments: Suggested Discussions and Analyses
A. Describe Eco–Products' early history (1990 through 2003). Would you view the firm during that
period as being a life–style business, an entrepreneurial venture, or? Why?
Steve Savage and his father founded the company in 1990 with the intent to provide eco–friendly
paper and janitorial supplies. They chose to locate the business in Boulder, Colorado, a community
known for its support of environmental initiatives and natural products. However, consumers were
slow to adopt eco–friendly products. Margins were low and salaries were small. Friends and family
supplied funds for business operations. This early history was ... Show more content on
Helpwriting.net ...
Note: we are using end–of–year balance sheet items (rather than averages) in order to have three
comparison years and to recognize that the firm's business model (from a retailer of products
manufactured by others to a manufacturer/wholesaler of eco–friendly products.
2005 COGS/Revenues = 2,584,326/3,649,799 = .708 = 70.8%
2006 COGS/Revenues = 3,684,492/5,751,787 = .641 = 64.1%
2007 COGS/Revenues = 7,726,455/10,867,104 = .711 = 71.1%
2005 Gross Profit Margin = 1,065,473/3,649,799 = .292 = 29.2%
2006 Gross Profit Margin = 2,067,295/5,751,787 = .359 = 35.9%%
2007 Gross Profit Margin = 3,140,649/10,867,104 = .289 = 28.9%
2005 Operating Profit Margin = 239,519/3,649,799 = .066 = 6.6%
2005 Net Profit Margin = 237,336/3,649,799 = .065 = 6.5%
2006 Net Profit Margin = 41,946/5,751,787 = .007 = 0.7%
2007 Net Profit Margin = –36,199/10,867,104 = –.003 = –0.3%
2005 Sales to Total Assets = 3,649,799/795,465 = 4.588 times
2006 Sales to Total Assets = 5,751,787/2,103,478 = 2.734 times

2007 Sales to Total Assets = 10,867,104/5,647,015 = 1.924 times
2005 Return on Assets = 237,336/795,465 = .298 = 29.8%
2006 Return on Assets = 41,946/2,103,478 = .020 = 2.0%
2007 Return on Assets = –36,199/5,647,015 = –.006 = –0.6%

Financial Intermediaries Exist Purely Because of...
Private equity is usually medium to long–term finance provided in return for an equity stake in
potential high growth unquoted companies. These equity investments include securities that are not
listed on a public exchange and are not easily accessible to most individuals [1]. There are usually
available only to high net worth individual 's, corporation 's, institutional clients etc. These
investments range from initial capital in start–up enterprises to leveraged buyouts of fully grown–up
corporations. Mostly Private Equity funds are structured as closed–end funds with a finite life span
of 10 or 12 years, which may be extended with the consent of the majority of the shareholders
(Gompers and Lerner, 1999). Although they are illiquid and ... Show more content on
Helpwriting.net ...
Some private equity funds that have made high–debt buyouts could crash too, and a number of
pending buyout deals may not go through. For eg at the end of July 2007, financing for the Alliance
Boots and Chrysler buyouts, two of the biggest private equity–backed deals in the markets, ran into
serious difficulties, intensifying fears about a looming credit crunch [5].
In recent months, all that has changed. Investors who previously snapped up private equity loans are
now being refused low interest rates and easy credit conditions [4]. The success of private equity
firms depends a lot on the availability of low cost debt. But in a situation like this it becomes more
difficult and more expensive for PE funds to borrow money to buy companies. If the economy slows
down, acquired companies ' cash flow will too, making it harder for PE funds to pay back borrowed
money. Volatile share markets will also make it more difficult for PE funds to re–sell companies,
especially as the potential buyers may themselves face tighter credit conditions. [5],
Globally private equity backed companies have shown to grow faster than other types of companies.
This has been made possible by the provision of a combination of capital and experienced personal
input from private equity executives, which sets it apart from other forms of

A Study On Private Equity Investments
The last few decades have witnessed massive evolution of private equity (PE) investing from the
small niche it used to be to the significant industry it is today. Currently, PE plays an essential role
in the economy; it enhances innovation and growth in expanding firms or promising start–ups, as
well as by nurturing the restructuring of companies that are already mature (e.g., Davila et al., 2003;
Cressy et al., 2007). Private equity investing has been acknowledged as a new and proficient form of
organisation that generates economic efficiencies through a superior governance framework. Due to
its ability to offer benefits in terms of diversification as well as return relative to traditional stock
and bond market investments, PE has become ... Show more content on Helpwriting.net ...
Based on Talmor&Vasvari (2012), in spite of the comparatively small number of vehicles, the
improvement is striking since some of the largest and most prominent private equity vehicles, such
as KRR and Blackstone, have preferred to go public. From an academic angle, the surfacing of
listed private equity vehicles drastically increases the opportunities for scrutinizing an industry that
is famous for being notoriously private.
Similar to PEs in developed markets, sub–Saharan Africa experienced a build–up of activity that
culminated to the financial crisis. Based on EMPEA (2011), a total of USD 6 billion dedicated for
sub– Saharan African funds was raised between 2006 and 2008 by Private equity capital. In spite of
the drastic increases compared with previous years (only USD 159 billion was raised by sub–
Saharan African funds between 2000 and 2005), the level of PE in the area is reticent in global
terms. During the same period Sub–Saharan Africa accounted for less than four percent of the USD
159 billion raised for all emerging markets between 2006 and 2008, and less than a fifty percent of
the USD 1.4 trillion raised worldwide by PE funds in the same period. Mergermarket (2012) insists
that in the same period, investment amounts across 47 markets in sub–Saharan Africa totalled USD
8 billion, compared with the USD

Free Cash Flow and Butler
Introduction Butler Capital Partners (Butler) is an investment fund founded in 1990. Butler closed
its first private equity fund, European Strategic Fund, in 1991. This first fund was mainly focusing
on small family owned enterprises and on divisions of larger companies. Mainly of his first success
he closed in 1998 his second fund, Private Equity II, and Butler became one of the largest
independent funds in France. With his second fund he would focus on investments in France on a
larger scale. On April 29, 1999, a new investment opportunity arose for Butler: Autodistribution
(AD). AD is an entrepreneurial firm and has become the largest independent automotive parts
wholesaler in France by the end of the 1990s. This report starts ... Show more content on
Helpwriting.net ...
Butler found some important development opportunities for AD: (1) an increase in penetration rate
of AD 's CBU among the affiliates by setting up an efficient IT system for purchasing, (2) external
growth opportunities in France by integration of affiliates or acquisitions of independent
wholesalers, (3) expansion opportunities in Europe provided by the fragmentation of the industry,
(4) low competition on acquisitions because of the lack of players able to afford a dynamic build–up
strategy, (5) strong growth potential of industrial supplies segment and (6) potential of development
of fleet maintenance and agreements with insurance companies. These opportunities will result in an
increase in gross margins through acquisition of independent wholesalers and integration of
affiliated wholesalers. Furthermore, a reduction of operation costs can be the result, because of the
IT system. With the existence of an efficient IT system, the margins can be improved or the prices
can be cut and these effects are even stronger with consolidation / expanding in the European
market. Besides these opportunities there is an opportunity for an e–business market. Butler stated
this as ‘one edge over the competitors '. Thus by expanding the business (through e–business,
acquisitions, integration) and making use of the new technology systems, AD could realize
significant margin improvement. These high margin improvements are expected to increase from
32.3% in 1999 to

Essay On Venture Capital
Venture Capital is a specific term that refers to funding obtained from a venture capitalist. These are
professional serial investors and may be individuals or part of a firm. Often venture capitalists have
a niche based on business type and or size and or stage of growth. They are likely to see a lot of
proposals in front of them (sometimes hundreds a month), be interested in a few, and invest in even
fewer. Around 1–3% of all deals put to a venture capitalist get funded. So, with the numbers that
low, you need to be clearly impressive.
Growth is usually associated with access to, and conservation of cash while maximising profitable
business. People often see venture capital as the magic bullet to fix everything, but it isn't. Owners
... Show more content on Helpwriting.net ...
There are specialists in each area and you'll find different companies with their own criteria.
FF & F – Family, Friends and Fools. Those closer to the business and often not sophisticated
investors. This type of money can come with more emotional baggage and interference (as opposed
to help) from its providers, but may be the fastest way to access smaller amounts of capital. Often
multiple investors will make up the overall amount needed.
Angel Investors – The main business angels vary from venture capitalists in their motives and level
of involvement. Often angels are more involved in the business, providing ongoing mentorship and
advice based on experience in a particular industry. For that reason, matching angels and owners is
critical. There are substantial easily locatable networks of angels. Pitching to them is no less
demanding than to a venture capitalist as they still review hundreds of proposals and accept only a
handful. Often the demands around exit strategies are different for an angel and they are satisfied
with a slightly longer term investment (say 5–7 years compared to 3–4 for a venture capitalist).
Bootstrapping – growing organically through reinvesting profits. No external capital injected.
Banks – banks will lend money, but are more concerned about your assets than your business.
Expect to personally guarantee everything.
Leases – this may be a way to fund particular purchases that allow for expansion. They will
normally be leases over assets,

Latin American Private Equity And Venture Capital Industry
Brazil is set to host the Olympic games next year with interest and excitement building on the streets
of Rio. But at the same time, the Brazilian economy is faced with some massive challenges.
Brazilian asset prices are plummeting, but analysts are calling for value investors to seek
opportunities in the sector and perhaps help the economy get back on track.
In fact, the recent research by the Latin American Private Equity & Venture Capital Association
(LAVCA) shows, the first part of the year has witnessed increase in fundraising, investment and
exits. The economic slowdown is providing opportunities, as heavily depreciating local currencies
are looking lucrative.
The Latin American Industry Outlook
The LAVCA data shows the region saw its fundraising increase by 21% in the first half of 2015.
Latin American private equity and venture capital firms raised an aggregate $4.27 billion. The first
half of the year witnessed the strongest fundraising since 2011. In 2011, a slightly higher $4.9
billion was raised during the first half.
It was the pan–regionally focused firms, which accounted for nearly 35% of the total capital raised.
This was nearly three times more than these funds raised during the first half of 2014. In addition,
the latest Preqin data shows that domestic managers have controlled the fundraising scene with
nearly 86% of fundraising arriving from domestic funds.
Despite the strong fundraising effort at the start of the year, LAVCA's analysts predict

Kmart & Sears Essay
Kmart, Sears and ESL: How a Hedge Fund Became one of the World's Largest Retailers
1. Describe recent trends in the hedge fund and private equity industry and the growing overlap
between the two.
A: Hedge funds, historically, were more interested in the buying and short selling of defaulted or
near–default bonds within a few weeks or months. This strategy was more of a short–term, exit–
focused strategy. Now, however, some hedge funds are becoming more interested in the
restructuring and long–term controlling of attractive assets. Hedge funds' stakes in these companies
are then transformed into equity from the arising new entity. Private equity is split up into Venture
Capital and Leveraged Buyout funds, with a little made up of ... Show more content on
Helpwriting.net ...
A: Kmart was, in the late 1970s, much larger than the famous superstore giant called "Wal–mart"
with sales 20x that of Wal–mart's and roughly 850 more stores nationwide. However, Kmart's sales
stayed consistently stagnant, while Wal–mart became the giant it is now. A poor supply chain,
unfriendly store layout, among other things, created a huge disadvantage versus other big box
retailers. In 2001, Kmart made a tragic decision to cut costs close to Wal–mart's famous "everyday
low price", but by doing so, took on huge losses and sold items well below cost. This resulted in a
lack of liquidity and the ending result of filing for chapter 11 bankruptcy.
Hedge funds started studying the value of Kmart's distressed assets, but none had the capital nor the
confidence to amass a controlling stake in the defaulted bonds. The bonds wouldn't be sold at par
value, but they would be sold for either cash through the sale of assets or bondholders would receive
equity in the new company emerging from bankruptcy. Bankruptcy was considered an opportunistic
time to acquire businesses that had strong synergies with existing, healthy companies of the same
industry. However, when one sector is struggling to stay afloat, other companies aren't usually able
or willing to commit the cash to acquiring the failed company and thus financial buyers step in.
3.

Michael Lederer And The Affordable Housing Market
Since the early 90s, Michael Lederer has played an active role in the affordable housing market. He
has owned senior, multifamily and affordable housing for more than 28 years. In addition, Lederer
founded Quantum General Incorporated, which is an affordable housing development company that
owns around several thousands apartment buildings sprawled across the United States. Even now,
Michael Lederer continues investing in real estate using several of the partnerships, and he serves on
numerous investment committees.
Where Lederer Went to School
Mike first graduated from the University of Southern California, and he earned his bachelor 's
degree of business from the USC in 1989. This private institution was first founded in 1880, and its
set on more than 226 acres of property, and it has a total graduate enrollment of around 18,740
students every years. On average, the campus contributes around $5 billion every year to the Los
Angeles county economy. After attending this school, Michael Lederer formed the L.A.
Development Group, which has been a real estate developer that has designed single–family homes
within the San Fernando Valley.
The Founding of Captive Media
In 1995, Lederer first founded Captive Media, which is an out–of–home advertisement company
that markets from media based on people who want to live an active lifestyle. After 2001, the
company reached a national level, and in 2008, they had private equity investors who got involved
with the company. That was

Ducati & Tpg
M&A (B) – Ducati & TPG
Question1: On a scale from 0 to 10, we would like to mark it with 2.
Answer:
TPG is overwhelmingly acting as a financial buyer.
Firstly, picking up Ducati as its target company is quite opportunistic. From the traditional
investment style's point of view, TPG is interested in those companies that had grown rapidly but
still had the corporate structures of very small companies which caused great stress to the
management of the business, and the assets of their target companies always being considered to be
divided in order to improve the business riping for LBO. Besides, TPG is expecting to add
complexity to the doing the deals and realize fiscal efficiency. Ducati is thus to be an ideal target
from these ... Show more content on Helpwriting.net ...
In this stage we would calculate the required rate of return of the asset, we can get the required rate
of return of the debt in the case (the 9th line, 4th paragraph, Page 9), and assume the debt to equity
is 2:1 (the 4th line,3rd paragraph, Page 9) and equity beta is equal to 1.1, the same as BMW's equity
beta (Exhibit 4, Page 16), the required rate of return of the market can use the Italian equity market
data to take average, and we use Italian Treasury Bond rate as risk free rate. Rd | | 11.25% | Rf | |
8.74% | Rm | | 21.42% | Beta | | 1.1 | Re | | 22.69% | Ra | | 15.06% |
3. As we have capital cash flow and required rate of return, we almost can calculate the firm value
of Ducati, but first we should get the growth rate of the company, since LBO affected the growth
rate of first a few years, we just assume the long–term growth would be equal to GDP growth rate.
g=8.45% V=PV(CCF1996) + PV(CCF1997)+......+ PV(CCF2003)+CCF2003×(1+g)/[(Ra–g)
(1+Ra)9]
E=V–D
ETPC=51%E Firm Value | | 414.6908 | billion lira | | | | Equity Value | | 134.6908 | billion lira | | | |
Equity Value of TPC's shares | | 68.69232 | billion lira | = | 44.76236 | million USD | Total Cash paid
| | 348.6923 | billion lira | = | 227.2203 | million USD |
Question 3: How much should TPG be willing to bid? How does this relate to your answers in
questions 1 and 2?
Answer:
We have the equation to

A Report on “a Study on Private Equity in India and...
A REPORT ON
"A STUDY ON PRIVATE EQUITY IN INDIAAND ANALYSIS ON PRIVATE EQUITY
INVESTMENTS"
SUBMITTED BY
SUBHASH KONA ROLL NO: 10138 Date: 9th October 2010 A REPORT ON
"A STUDY ON PRIVATE EQUITY IN INDIAAND ANALYSIS ON PRIVATE EQUITY
INVESTMENTS" ... Show more content on Helpwriting.net ...
Hordes of private equity professionals, venture capitalists and investment bankers are making a
beeline to identify lucrative business opportunities in India. Some of the profitable exits announced
on the global private equity stage, the arrival of the Indian market as a hot destination with immense
potential for private equity funds, and its readiness to embrace the global private equity with open
arms. Today, some of the world's leading private equity firms like Blackstone Group, Carlyle Group
and General Atlantic Partners, and Actis Partners are firmly established in India. Some of the Indian
firms like ICICI, IDFC and Kotak are also increasing their investments. And many new foreign PE
funds like Lightspeed Venture Partners, Providence Equity Partners and Apex Venture Partners are
planning to venture into India. Coming to the global picture global trends show that the private
equity (PE) industry was once dominated by North America but recent years have seen global
emergence of the industry. US still contributes a two–thirds of the total funds raised globally and it
does not seem to be changing in the near future. However, an interesting fact is that the proportion
of the investment going back to US is gradually decreasing every year. Till the last few years, almost
60% funds were invested back in US with only 25% going to Europe and remaining landing in Asia
Pacific. But the

Valuations Differences in Private Equity Funds, Mutual...
Over the last several years, the total number of investment options that investors have available to
them, have increased dramatically. This is evident in the overall increase in the number of private
equity funds, hedge funds and mutual funds. For example, the total number of private equity deals
that were completed in the year 1970 was a total of 12 transactions accounting for $13 million of
investment capital. In 2007, this number of transactions increased 2, 247 and accounted for a total of
$70 billion in investment capital. (Shapiro, 2008) This is significant because it underscores the
overall shift in the way that investors can make money, in an economy that is increasingly becoming
more globalized. As a result, the prudent investor ... Show more content on Helpwriting.net ...
The idea, is that by restructuring the company and eliminating those issues that were causing it
financial problems, you can be able to create significant value by purchasing the company for
pennies on the dollar. ("Private Equity Fund," 2010) There are several key objectives that all private
equity funds and investors will have in common to include: taking a long term horizon, investing in
those companies / industries that will generate significant value and minimizing the short / long term
risks as much as possible. All private equity funds will take a long term horizon of several years or
more. This is because the objective of a private equity fund is to control the company that they are
purchasing. Where, they will have an influence on the board of directors and the management itself
to achieve its long term objective of creating value. As a result, this will involve working actively to
be able to restructure the different departments, so that the business is more productive. (Thomas,
2006) Investing in those companies and industries that will create significant value is when the
private equity funding is performing careful analysis of the investment, before a deal is announced.
This is because the shareholders want to be satisfied that any kind of company or industry that they
will be going into has the long term potential of providing the fund with significant returns. As a
result, this means that more due diligence will take place

Theories Of Stakeholder Salience
Stakeholder salience is a descriptive theory which is used to qualify the types of stakeholders,
mapping who matters and is influential for the company. The authors of this paper firstly believe
that portfolio companies employees aren't valued enough by the Private Equity firms. In order to
investigate this statement, the stakeholder salience theory was chosen in order to analyze whether
the implementation of the better CSR initiatives reporting could enhance their salience.
The Theory of Stakeholder Identification and Salience by Ronald K. Mitchell, Bradley R. Agle and
Donna J. Wood (1997) responds to the plethora of definitions regarding what is a 'stakeholder' and
the lack of consensus regarding 'Who and What Really Counts' in stakeholder ... Show more content
Mitchell et al. (1997) define power as the degree to which a stakeholder has or can use coercive
(physical), utilitarian (material) or normative (prestige, esteem and social) means to impose its will.
Reputation wise, Gifford (2010) claims that power is linked to reputation risks. Public or private
statements, depending on how powerful they are, affect the reputation of an organization. Hence, a
successful engagement of the stakeholders may exert impact on reputation, through power.
LEGITIMACY is a generalized perception that the actions of an organization are desirable, proper
or appropriate within some socially constructed system of norms, values, beliefs and definitions
(Mitchell et al., 1997). Within the salience model, legitimacy is divided into three types: individual,
organizational and societal legitimacy. Individual: depends on perceived professionalism, status and
level of experience. It is the ability to build trust and develop a good relationship with management.
Organizational: is the level of credibility the organization enjoys in the market. Societal: is the level
of support the community express for the subject of

General Partner (Gp). If A Fund Is Created Then Obliviously
General Partner (GP)
If a fund is created then obliviously you need a person to manage it. This is done by General Partner
(GP). GP makes all decisions about the private equity fund and is also in charge of managing the
fund 's portfolio. The portfolio will contains all of the fund 's investments.
General partner is paid either by way of a management fee or it can be by way of compensation.
Management fee is a fixed percentage of total amount of the fund's capital. Generally this fee range
from 1% to 2% annually of the capital committed.
For example if Assets under management is 100bn than a 2% management fee would be $2bn.
These fees are utilised for admin purpose and to cover expense such as salaries, deal fees paid to
investment ... Show more content on Helpwriting.net ...
So GP contributed only 5% in the fund.
The GP agter receiving funds would invests all of the capital in acquiring companies. As few years
pass by, they exit all their portfolio companies for $2B total. The LPs get $ 860Mn back first – that's
returning their capital. That leaves $1.14 B left, and it's divided up 80 / 20 between LPs and GP. So
the LPs get $ 912M and the GP gets $228M. So the GP invested $40M at the start, but gets back
$200M in profits. GP thus made a 5x return in this fund.
Sometimes carried interest is in form of equity.
Interest in a fund is allocated as shares. This interest is based on each Limited Partner's capital
contribution, with a certain percentage of these shares (which would be typically 20%) allocated to
the General Partner as carry. Carry shares more often than not have a multi–year vesting period that
tracks investments made.
Equity carry is split between senior executives at the private equity firm. There are many flavors of
carried interest so doing an apples to apples comparison of two different carry packages is often
difficult.
Performance fees motivate the private equity firms to generate superior realized returns. These fees
are intended to align the interests of the general partner and its LPs.
Hurdle Rate
However, many PE firms allow this performance fee post Hurdle rate. So the General Partner will
receives the carry that is performance fee only when the fund generates profits above a certain

Attractive Returns For The Vc
Attractive Returns for the VC
In return for financing one to two years of a company's start–up, venture capitalists expect a ten
times return of capital over five years. Combined with the preferred position, this is very high–cost
capital: a loan with a 58% annual compound interest rate that cannot be prepaid. But that rate is
necessary to deliver average fund returns above 20%. Funds are structured to guarantee partners a
comfortable income while they work to generate those returns. The venture capital partners agree to
return all of the investors' capital before sharing in the upside. However, the fund typically pays for
the investors' annual operating budget–2% to 3% of the pool's total capital–which they take as a
management fee regardless of the fund's results. If there is a $100 million pool and four or five
partners, for example, the partners are essentially assured salaries of $200,000 to $400,000 plus
operating expenses for seven to ten years. (If the fund fails, of course, the group will be unable to
raise funds in the future.) Compare those figures with Tommy Davis and Arthur Rock's first fund,
which was $5 million but had a total management fee of only $75,000 a year.
The real upside lies in the appreciation of the portfolio. The investors get 70% to 80%of the gains;
the venture capitalists get the remaining 20% to 30%. The amount of money any partner receives
beyond salary is a function of the total growth of the portfolio's value and the amount of money
managed

Advantages And Disadvantages Of Business
2) FAMILY AND FRIENDS:
Friends and family who are supportive of the business idea provides money either directly to the
entrepreneur or into the business. Borrowing in this way can add to the stress faced by an
entrepreneur, particularly if the business gets into difficulties, also socio–relations come in the
picture.
ADVANTAGES:
Quicker and cheaper to arrange.
Interest and repayment terms may be more flexible than a bank loan.
Financial pressure is normally less than with a bank. You get more time to repay.
The bond you likely have with the family or friend is typically higher than the one you have with a
bank or lender.
Borrowing from a close family member or friend is the possibility that the debt is forgiven.
DISADVANTAGES:
The fund provider may feel that he or she is now part owner of ... Show more content on
Helpwriting.net ...
It's also called IPO preparation funding schema, the ultimate aim of which to have clear exit policy
and prepare the business to be sold–off attractively.
ADVANTAGES:
Obtaining venture capital financing can provide a startup or young business with a valuable source
of guidance and consultation.
In a number of critical areas, including legal, tax and personnel matters, a venture capital firm can
provide active support.
Faster growth and greater success are two potential key benefits of venture capital funding.
Venture capitalists are typically well connected in the business community.
DISADVANTAGES:
An Entrepreneur may lose control over its business. It is likely that your venture capitalist will want
to be involved in your business stake.
You could lose management control in your business because of the VC firm's stake in your
company.
Benefits from such financing can be realized in long run only.

All business operations will be under constant scrutiny.
Venture capitalists take too long to decide whether to invest in your business or

Essay on Mezzanine Finance Explained
Mezzanine Finance by Corry Silbernagel Davis Vaitkunas Bond Capital With a supplement by Ian
Giddy
Mezzanine Debt––Another Level To Consider
Mezzanine debt is used by companies that are cash flow positive to fund: further growth through
expansion projects; acquisitions; recapitalizations; and, management and leveraged buyouts. When
mezzanine debt is used in conjunction with senior debt it reduces the amount of equity required in
the business. As equity is the most expensive form of capital, it is most cost effective to create a
capital structure that secures the most funding, offers the lowest cost of capital, and maximizes
return on equity. Mezzanine debt has been around for over 30 years, however its use in Western
Canada and the ... Show more content on Helpwriting.net ...
Although it makes up a portion of a company's total available capital, mezzanine financing is critical
to growing companies and in succession planning in recent years. The gap in funding between
senior debt and equity is common for the following reasons: 1) accounts receivable, inventories and
fixed assets are being discounted at greater rates than in the past for fear that their values will not be
realized in the future; 2) many balance sheets now contain significant intangible assets, and, 3) as a
result of defaults and regulatory pressure, banks have placed ceilings on the amount of total debt a
company can obtain. While additional liquidity can be obtained from equity investors, equity is the
most expensive source of capital. Further, equity capital, by its nature, dilutes existing shareholders.
As a result, mezzanine debt can be an attractive alternative way to obtain much needed capital.
Capital Structures
While there are no hard and fast rules for optimizing a company's capital structure, companies that
are ahead of the curve use an efficient combination of senior debt, mezzanine debt, and equity
capital to minimize their true cost of capital.
COMPANIES WITH EFFICIENT CAPITAL STRUCTURES EMPLOY A NUMBER OF
CAPITAL SOURCES
Expected Returns (%)
Typical Private Equity Structure (% of total Assets)
Senior Debt and Asset Backed (Stretch) Lending 30% – 60%
5% – 12%

Mezzanine 20% – 30%

Yale Case
1. How has the Investment Office selected, compensated, and controlled private equity fund
managers? What explains the differences between their strategy in private equity with that in other
asset classes (e.g., real estate)?
As for private equity asset allocation the Investment Office focused on finding external "value–
added investors" with the sterling capability to build better businesses not only financially but
mainly operationally. They believed this strategy led to enhancing returns independently of the
market downturns. Thus, a limited number of long–standing partnerships were created – exclusively
with partners aligned with the generalized investment policies of the Investment Office – with "over
90% of the portfolio invested in ... Show more content on Helpwriting.net ...
However, contrarian to other endowments, Yale changed the composition of its private equity
investments during the 90s. The Investment Office dampened the weight of venture capital funds in
its portfolio (46% in 1990 against 25% in 2006) as a result of lack of high–quality venture capital
funds.
More recently, the overall weight of private equity in the Investment Office portfolio has been
decreasing (from a target of 25% against the most recent number of 17%) as a consequence of Yale
perceiving lack of specialization of several equity funds ("positioning themselves as asset
managers") and because of the indiscipline and inexperience of several new market players. Albeit,
Yale has not dismissed this asset class due to the historical success, the strong relationships
developed with key managers, its know–how and experience on the private equity process and not to
be perceived as a market–timer type of investor.
As mentioned before, the investment office portfolio is constituted by 4 main "categories" of assets:
marketable securities, private equity (both domestic and international), real assets and absolute–
return strategies.
Bonds constituted a very small part of Yale's portfolio (around 4%) since Swensen didn't consider it
to have a fair risk/return relationship. Also, he believed this type of market was so efficient that
desirable returns were very hard to achieve, much contrarian to private equity, especially across
boarders.
The real estate

Private Equity in Nigeria
An Overview of Nigerian Venture Capital and Private Equity
Page 2
CONTENT
EXECUTIVE SUMMARY 3
NIGERIA COUNTRY ANALYSIS 5
TABLES AND EXHIBITS 7
Page 3
Executive Summary1
Nigeria is facing an uncertain future as outbreaks of ethnic and religious violence continue to place
strains on Africa's most populated country. With the 2003 elections approaching, the continuing
battle amongst incumbent politicians and between competing ethnic and regional groups is likely to
intensify. Such an environment will test Nigeria's fragile democracy, which has never witnessed a
hand over from one civilian government to another. The Nigerian government ... Show more content
There are currently no buyout firms in Nigeria at this time.
Sources of funds
About 42% of Nigeria's independent funds are sourced mainly from US and European government
and aid agencies, 17% from local banks, 25% from local pension funds, and
15% from partners and other sources. In Nigeria, institutional investors are reluctant to invest in
private equity. A large reason for this is might be lack of familiarity with the private equity asset
class. In the short term, Nigeria may see increased commitments from US and European government
and aid agencies is most likely, however foreign pension funds are not likely to be significant source
of commitments.
Investments

Private equity investments in CAPE portfolio companies grew from approximately $5 million in 5
companies in 1999 to approximately $12 million in 4 companies in 2000.
The average deal size has increased from approximately $1 million to approximately $3 million for
new investments reflecting the later–stage of the investments.
The fund has made 65% of its investments in telecommunications and information technologies
sectors and 35% of its investments in the media and outsourcing sectors.
Approximately 60% of the funds investments are expansion and development capital and
40% are venture capital.
Exits
The fund has not exited any of its investments, but is currently in negotiations for the sale of one of
its portfolio companies.
Confidential Page 5
Nigeria

Advantages And Disadvantages Of Venture Capital Funds

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