HAVE YOU ANY IDEA Who You Are Talking To?

Venture capital, private equity, mezzanine debt, endeavor debt, angel money, investment bank or investment company? What’s the difference and who are the players? Many people begin looking for funding and become involved with investment bankers or business agents without really understanding what they want for or who they are speaking with. Venture capital firms (VCs) increase money from limited companions and invest the amount of money in companies for a share of the possession.

This is not so different than investing money in the currency markets: you buy shares and also have a say in the way the company is run (abet a little say – that’s the actual proxy is for). With VCs, it’s a private transaction and they require a significant amount of control. They are, however, not interested in running the business on a day to day basis.

Angels are individuals who make investments their own money in a company for a share of the company. The amount of control the angel wants usually depends upon the class of the average person and the interest he or she has in being mixed up in company. Some angels will make investments and come in as management, some will make investments and stay very hands off in the management of the company. Technically, private equity is any ownership stake purchased through a private transaction, which include angels and VCs. Venture debt is a funding source that will not require an ownership stake in the company (although they do normally want warrants).

Similar to capital raising, it is for early stage companies that are thinking about funding expansion. They require a high interest rate plus some control over the ongoing company, in the form of covenants usually. Like private equity, mezzanine debt is commonly for more mature companies. The interest rate is high and warrants are usually required usually. Mezzanine debt will be subordinated to bank debt, but will have a claim on the assets of the business senior to the shareholders. Unlike their name, investment banks neither invest nor do they lend.

They are thinking about transactions between companies and preliminary open public offerings. They use their knowledge and experience to advertise the company to the public and to other banking institutions (who’ll then sell the stocks to investors) and are paid a charge for this service. Generally, investment banks are intermediaries and not interested in keeping possession stakes themselves. Like an investment bank or investment company, business brokers aren’t interested in trading money.

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They are thinking about finding a buyer for your company. They usually have numerous industry contacts and also have a good understanding of the worthiness of the business and what exactly are current purchase structures. If you have decided that it is time to raise money for your business, you must ultimately decide what you want. If you’re ready to get out of the business, you want an investment bank or business broker. If you’re planning on taking your company to the next level and growing it for an IPO, then you are most likely looking for venture capital or some sort of debt. If you are thinking about readying the company for a huge sale, then you might be looking for a private equity firm. Understanding what you want is the key to getting the most value out of your business.

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