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Benefits Of Investing In Private Ventures

Generating Returns & Profits Regardless Of Market Cycles.

A private venture capital fund is an investment fund accumulated through several private individuals for the purpose of investing in the growth of new companies considered to have a high potential for substantial growth and ultimately produce a significant return to their investors.

In return for their investment through private venture capital funds, a proportional amount of equity is awarded to the investor to profit from as the new company expands and increases its value.

The capital accumulated through private venture is managed by an individual or organization that represents the wishes of those who have invested. It is then their job to locate new businesses with the potential for a high return and provide them with an investment on behalf of their clients. The party responsible for managing the investment will establish a relationship with the company, aiding and assisting them through the initial steps of their early development as well as taking a seat on the board of directors. “Venture Capital is about capturing the value between the start-up phase and the public company phase,” the quote by Fred Wilson, venture capitalist, and businessman, provides a distinctive summary of just what a private venture capital fund strives to do.

Starting an Investment
A private venture group can have any number of investors; however, the average number is around 85 individuals each who invest their own capital. The minimum amount of capital requested is in excess of $250,000 and while this amount can occasionally go lower, it does not open access to all investment groups, with a vast majority requiring substantially more capital. Even with the required income or net worth to be applicable for investment in private venture capital funds, it can be difficult to find your way into an opportunity, many of the groups choosing to remain exclusive.

Qualified investors can apply for membership to different platforms such as iCapital Network that provide access to new investment opportunities or through financial brokers who specialize in private venture capital. The majority of individuals who opt to invest in private venture capital funds have an on-going established relationship with the various firms that offer venture capital. Investments into venture capital are generally more selective than opposing investment opportunities, however, they do come with various benefits. In her highly popular book, ‘The Business of Venture Capital,' Mahendra Ramsinghani provides an in-depth look at the cycle of venture capital; her famous quote “ the First-time fund is acceptable, but not a first-time investor” shows the exclusivity of being accepted as an investor.

Benefits and Rewards of Private Venture Capital Funds

Companies looking for venture capital funding span every industry, offering an endless choice for investors to select and choose their preferred industry type. One of the biggest innovations in software technology in the modern day is the development and production of virtual reality software. Oculus VR is one of the most well-known brands of virtual reality software and was on the receiving end of venture capital investment during its early days. Just 5 years after the company was founded, Oculus VR was purchased in a deal with Facebook that totaled $2 billion. While there are several risks involved with private venture capital funds, the rewards and advances in technology can be exceptional.

1. Possible Returns- In the short term a private venture is an initial risk of investment towards a new business and the following growth of the capital fund, this is expected to yield a 20% return per year. The long-term goal of a private venture is normally to establish an exit plan once the value of the company has reached a strong point, this is generally designed to take on average 7-10 years with an expected return of no less than 10x to 30x the investment stake.

2. Active Management- Where venture capital funds differ considerably from most other investment opportunities is the active management the venture capitalist will take in the invested company. The advantage of the company gaining high profile business contacts and experienced advice significantly influences growth and return from beginning to end.

3. Economic Growth- Private venture investment in start-up companies with high potential for growth boosts the economic development of a country as well as increasing employment in the long term. In 2015, the U.S received $58.8 billion in venture capitalist investment, aiding the growth of various industries, and promoting developments in new radical technology.

4. Rapid Growth- Investor influence over companies encourages rapid growth and quicker returns on private venture investments. Rapid growth is crucial to cornering the market, and through substantial investment, a company has the edge over new and emerging competition helping to secure its place and value in the market.

5. Extensive Choice- With many new start-ups emerging in the industry, a venture capitalist has the luxury of choosing and establishing a relationship with the company that best suites it’s investors requirements. Choice of company strengthens the due diligence of evaluating potential start-ups and properly examining the market and market potential. The freedom of choice removes much of the anonymity of the stock exchange and selecting stock investments purely for their current or potential future value.

Your First Private Venture Capital Fund

There are many events worldwide that provide an introduction into the workings of venture capital and act as an insight into what it means to invest in a private venture capital funds. The National Venture Capital Association (NVCA) hosts regular events and summits such as the ‘Bay Area Life Sciences Roundtable’ which discusses the newest and most groundbreaking science trends. NVCA events are ideal places to meet like-minded people interested or experienced in venture capital.

Capital venture has made a significant impact on the business world and continues to do so; with new, inventive, and successful companies able to grow due to the acquisition of a private venture capital funding. The 2011 film, ‘Something Ventured’, delves into the world of capital venture, showing just how some of the biggest companies earn their place in the market using venture capital funds. Many of the most well-known companies are working examples of how venture capital has influenced the market and more and more opportunities are emerging every day for eager investors.

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