What are venture investments, what are their pros and cons

• What is venture investment in simple words?
• Pros and cons of venture capital investments
• Is it true that venture investments have a minimal degree of risk?
• Which companies are suitable for venture investment?
• Types and examples of venture investments
• Basics and subtleties of venture investing
• 6 steps on how to make money on venture investments
• Secrets and problems of attracting venture capital investments in startups
• On the development of venture investments in Russia
• Review of Russian venture investment funds: TOP-12
• Interesting facts about venture investing

Venture investments are a fairly new phenomenon in the Russian Federation, but still dynamically developing. Thanks to it, you can make good money for those who want to invest their money in potentially profitable companies.

However, often when faced with venture investment opportunities, people do not know where to start and make a lot of mistakes. So that you can properly understand the basics and intricacies of this process, starting your own business, we have prepared this article for you.

What is venture investment in simple words?

Translated from English, the word “venture” means “risky undertaking.” It follows that venture investments are investments with a high degree of risk for the investor.

How is it that when you make venture investments you are dealing with very high risk? This is explained by the fact that in this case you are investing in the latest technologies and innovative businesses that have no analogues on the market yet.

Eg.

Such familiar things as railways, computer equipment, mobile communications also just appeared once, and investments in them were venture capital. However, at present this is a very ordinary business, investments in which do not involve a high degree of risk.

Investors finance new projects at the initial stage, and when the company gains momentum and becomes stable and profitable, they sell their shares at a good price.

The amount of risk is directly proportional to the future profit received. Although venture investments are quite dangerous investments, but, according to statistics, they are also the most profitable for many investors.

Individuals (most often legal entities) and entire funds can act as venture investors.

A venture fund is a special fund that works with so-called startups (the latest innovative projects).

Of course, investing in one enterprise is very risky. Therefore, funds place them in several dozen projects at once. It may happen that only one startup succeeds, but it will bring such a large profit that it will fully recoup the costs of all other investments.

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Venture capital is general funds from investors to fund startups.

The venture investor receives part of the profit from the business, and sometimes can participate in project management (also not for free).

General risk[edit]

As mentioned in the first paragraph, a venture capital company is not only about funding and profitable returns, but also offers knowledge support. In addition, as can be seen below, the degree of risk (loss of investment value) decreases with each additional stage of financing.

Pros and cons of venture capital investments

This investment option has a large number of advantages:

• high level of income;
• making a profit in a short time;
• absence of legal and legal difficulties;
• receiving dividends on an ongoing basis;
• simple investment scheme.

First of all, venture investments are legally safe investments. Investors do not risk anything, since if the enterprise that received the funds breaks the law, then this will fall only on its shoulders. In this case, the investor is not responsible for the actions taken.

The main feature of venture investments is the high risk of investments. According to statistics, only 1 out of 10 startups become successful and profitable. But there are still a number of disadvantages.

The disadvantages of venture investments include:

• incomplete information about potential risks. The organization that created the startup may unconsciously or consciously keep silent about them;
• often understated income of the investor specified in the contract;
• the likelihood of facing high taxes.

To get shares in a stable, mid-income company, you need to spend at least $10,000.

It often happens that companies may break the law to avoid taxes. This usually results in legal liability. In these circumstances, most likely, even a super-successful project will be closed, and investors will lose their invested capital.

Factors

According to unofficial data, in the Russian Federation there are 10 thousand private investors with untapped opportunities. For venture financing of innovative activities to develop, a number of conditions are necessary:

• stable situation in the country;
• availability of scientific and technical progress, design developments;
• growth in income levels;
• narrowing of speculative income, etc.

There are factors that limit the growth of this area:

• low degree of development of the stock market, which makes it difficult to find potential investors;
• lack of managers capable of revealing the commercial opportunities of developments;
• low customer demand for domestic products;
• lack of government support.

Venture capital investments have a minimal degree of risk - is this true?

When making investment decisions, you need to understand that in any innovative business you may encounter a large number of risks. Let's look at the main ones.

1. Risks associated with the manufactured product. First of all, the product must reach the market and bring a certain profit.
2. Risks arising from the wrong choice of market type. The following are distinguished: new, actually existing and resegmented existing. The right product promotion strategy is chosen based on the type of market.
3. Competitive risks. There will always be people who want to make money on a truly profitable product.

Be sure to conduct a thorough risk analysis. Only after this can a decision be made in favor of investing in venture enterprises. In this case, there is no need to rush.

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• Company marketing strategy: from development to analysis

As we can see, such risky investments have a high risk of capital loss. A business may face a variety of risks, from misallocation of cash flows to errors in projected profit forecasts. In this case, it is worth financing projects in which the amount of potential risk is covered by high profits in case of success. Typically, venture investors are mutual funds, venture capital firms, or private investors.

Investors, as a rule, are closely connected with all work processes of the enterprise.

They jointly conduct examinations, plan and calculate potential risks and profits, and also actively conduct consultations during business meetings. It follows from this that venture investors invest not only their money in the project, but also time and experience throughout the entire process of establishing a new company.

But it is worth noting that most investors are looking for the most profitable enterprises that have a more realistic chance of successfully entering the market. All this is because the main and, perhaps, the only goal of all venture investments is to obtain the greatest profit.

Features of venture financing

This type of investment has a number of characteristics:

• Investors are aware in advance of the risks of financial loss if the organization fails. If the outcome is positive, investors will receive high profits.
• This type of financing provides for a long waiting period (3-5 years), after which the investor will receive income for 5-10 years.
• The investor owns a 25-40% stake, but has a high personal interest in the success of the institution. Therefore, it provides consulting and management services.

Which companies are suitable for venture investment?

First of all, so-called risky investments will be interested in enterprises with good growth potential. Here we are not talking about the current position of the company, but rather about the prospects for further development.

Those projects that will actively and with high turnover develop in the next five years can receive venture investments.

From this we can identify general criteria for the attractiveness of companies for potential investors:

• good chances for growth and development;
• results-oriented team;
• qualified management;
• the ability to implement plans.

Links[edit]

1. ^ a b "Effects of Entrepreneurial Financing: A Regression Discontinuity Analysis". hbs.edu
   . April 15, 2010. Retrieved March 23, 2022.
2. "Venture Capital". expertwritinghelp.com
   . April 15, 2010. Retrieved March 23, 2022.
3. Röhm, P., Köhn, A., Kukertz, A. and Dehnen, H. S. (2017) A world of difference? The Impact of Corporate Venture Capitalists' Investment Motivation on Startup Valuation. Journal of Business Economics. DOI: 10.1007/s11573-017-0857-5
4. McGuire, Terry (1 July 2022). "The Many Shades of Venture/Repeat Entrepreneurial Relationships". Head of Life Sciences
   . Pennsylvania, USA: VertMarkets.
5. Gerken, Louis S. (2014). The Little Book of Venture Investing: Empowering Economic Growth and Investment Portfolios
   . Wiley. ISBN 978-1-118-55198-1.
6. See Link: Authors: Ruhnka, JC, Young, JE
7. ^ ab Runka, JC, Young, JE
8. Ruhnka, J. C., Young, J. E. (1987). "Venture model of the development process of new enterprises." In
   :
   Journal of Business Entrepreneurship
   . Volume: 2, Issue: 2 (Spring 1987), pp. 167–184.
9. Finance, personal; Real estate, mortgage, real estate (July 29, 2016). "Zero Equity on a $2M Home Isn't a Problem in the 'Weird and Scary' Silicon Valley Real Estate Market." financialpost.com
   . Retrieved March 23, 2022.

Types and examples of venture investments

Venture financing is usually divided into types depending on the companies to which investors contribute funds:

• Startup. This is usually the name given to a young company that does not have its own sufficient budget, but already has a unique, fundamentally new idea that has no analogues on the market. Potentially, this product should be of interest to the consumer.
• A company that does not have enough own funds to increase its sales market and increase productivity.
• A company that has already created a product but has not brought it to market. In this case, she still does not know how necessary it is and what attitude the consumer will show towards it.

An investor who has invested money in a potentially profitable project may not participate in the process of its management, leaving this work to the creators and developers. With this approach, this will be a short-term financial contribution, which is relevant precisely at the stage of development of the company. Afterwards, the investor receives either a positive result in the form of profit, or a negative result in the form of loss.

Let's look at options for promising ideas on the Russian market:

• Prisma
  . Using this application, a social network user can turn his photo into an artistic canvas. And just one touch.
• Cardberry
  . A device to save space in your bag or pocket. Enter into its memory all the plastic cards you use. If necessary, just go to the application and select the one you need.
• SVET
  is a company that develops natural light bulbs of unusual shapes. You can also further adjust their brightness.

Who are business angels and how do they differ from venture investors?

The lyrical name, a little unusual for business terminology, appeared in the 20s. XX century. That’s what wealthy patrons of the arts in Europe were called at that time. They invested in theatrical productions. Profit was received only if the performance was successful.

Currently, this element remains, although it has undergone some changes. Business angels invest in projects in which they are not only interested, but where they can apply their own skills.

Often, business angels become business angels not only for the sake of making a profit, but to transfer experience or put their knowledge into practice. So to speak, for moral satisfaction.

The table below will help you understand the difference between business angels and venture investors :

As a rule, a business angel is an entrepreneur with a solid education and extensive personal experience. The intellectual side of the project is not the least important for them.

Therefore, most often they invest in high-tech businesses and Internet ideas. According to statistics, every fifth of them is a millionaire.

In Russia, angel investing is not yet very developed. Although now business angels are already uniting in networks, of which there are currently more than 20 recorded.

There is more detailed material on business angels on the website.

Basics and subtleties of venture investing

1. Investors finance funds at the stage of project creation. It may happen that capital is contributed even before the initial registration of the company. In this case, investors are guided only by the business plan, since the activity is not yet underway and it is not yet possible to see the real profitability.
2. There are no guarantees. If the startup you invested in fails, you have no right to demand your investment back. Here you are fully responsible for your capital. The main advice in this case is to choose projects carefully.
3. When you invest financially in a specific project, you acquire a part of it. This is stated in a special agreement. After successfully entering the market and making a profit, you are entitled to receive your share. It is worth noting that the size of this share often does not directly depend on the amount of financing. It happens that the author of the idea does not invest money in his project at all, and investors completely bear the financial costs. At the same time, the person who invested in the project cannot own more than 50%. Typically, it is believed that the founder of a startup contributes an intellectual idea, and the investor contributes money.
4. Yes, venture investments involve high risk, but at the same time they can bring very good returns. There have been projects that increased investors' investments several times at once in a short period of time. High income is a great plus. One successful contribution can cover several unsuccessful ones at once. It will be great to choose a successful startup if you have the skills to qualitatively evaluate proposed projects.

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5. A potential sponsor needs to understand that if he has competence and experience in a similar area of ​​business, he may well take part in the development process of the project or advise its authors. It often happens that the investor-creator relationship goes beyond the points specified in the agreement. Sponsors express their ideas and plans and directly participate in the management of the enterprise, thereby increasing the efficiency of the entire process.
6. Sometimes a situation occurs when the author of a startup needs funds not at the very beginning of creating an enterprise, but only during the work process. It is at this stage that you can take advantage of additional investments - both interest-bearing and not. The lender sets a specific deadline for repayment of funds. The only thing he needs to understand is that the borrowing company is liable to him only in the amount of its authorized capital. If the debt exceeds the authorized capital, the creditor loses this difference.
7. If we talk about classic investing, here the investor seeks to buy a controlling stake in the company.
   In this case, he will have the last vote in making significant and serious decisions on the board of directors. If he has access to the top management of the company, he will be able to arrange his career, as well as influence other projects. But in venture investing, things are different. The sponsor does not need to buy back most of the shares. First of all, when investing money, he expects to receive a good profit. The conditions for the investor’s participation in the venture project are stipulated by the contract, that is, all important decisions are made either jointly or individually by the author himself. One of the principles of venture investment is joint and transparent management and development.
8. In the first few years, the investor rarely makes a profit. All funds received from the activities of the enterprise go towards further development. The investor receives his dividends only after the product has been reliably established on the market. Of course, there are always exceptions to this rule.

Stages

• Pre-launch investments. At this stage, small amounts are invested to prepare the technical and economic base.
• Start-up capital is created on our own. As the business develops, other investors will join.
• Second phase. Funds are allocated for completion of development and initial marketing.
• Third stage. Financing the start of production. The company receives little or no income.
• Fourth stage. Transitional investments. Working capital is provided to expand inventory and pay bills.
• Fifth stage. Acquisition of ownership rights to a company, its modernization into a private institution.

Financial investments come in shares. The business plan includes a schedule for achieving intermediate goals. Investors provide pre-calculated amounts sufficient to achieve the following subtotals. Such injections limit the potential losses that may arise if the company does not live up to expectations. The possibility of stopping the flow of funds at each subsequent stage motivates the entrepreneur to quickly realize the organization’s potential. Infusions are carried out at short intervals. subsequently, control over the organization is strengthened. With each subsequent injection of funds, the number of investors' shares increases.

Secrets and problems of attracting venture capital investments in startups

Investments in newly created companies, so-called startups, the distinctive feature of which is a high level of risk, but at the same time good profit, are called venture capital. It is worth noting that in order to receive funds, the project must already have a finished product. The sphere of innovative technologies most often receives venture investments, being the most highly profitable and promising. These contributions have a clear target orientation and are provided to companies for specific purposes, which are specified in the contract.

1. To receive financial investments, startups need to have certain indicators

Most often, a company manages to receive the necessary investment if the pace of its development is steadily growing. Enterprises that have reached self-sufficiency or already have a small income are more popular.

But there are still other indicators:

• In the B2B sphere, successful companies are those that have a number of concluded contracts for product implementation.
• In the field of media, marketing and Internet services, the company’s weekly growth rate of real clients must be at least 6%.
• If the activities of a young company involve the production of a specific product, then it is imperative to have a working prototype. In addition, it must already be positively assessed by the consumer (for example, on a crowdfunding service).
• If the company has achieved a stable growth of more than 10%, then investors themselves will actively offer their services. Such an enterprise is considered successful and profitable.

On the Russian market, one of the important criteria for assessing a potentially attractive enterprise is the presence of a well-formed, competent project team. This dreamteam includes:

• A general manager or entrepreneur who has relevant experience and understands a particular area of ​​business
• A developer with extensive experience (more than five years) of working in a large company and possessing all the necessary skills.

This core team creates the base of the product and its presentation to the consumer. Employees such as marketers, designers, accountants and lawyers are not so significant for the investor, since they can be replaced quite easily without harming the project.

Obstacles to obtaining investment:

• No patent or intellectual property rights for the product.
• Simultaneous work of the main team on other projects.
• Personal contradictions among team members.
• Difficulties with scaling the project.
• A small share of the company's ownership is held by its creators.

2. Seed and angel investments

If the company satisfies all the above conditions, then it will easily receive the first, so-called seed investments. They are also venture capital, although they are not yet venture capital in the full sense of the word. They are a pilot investment designed to bring an innovative product to market for the first time. Seed investing is the most risky, but its income is also the highest, even when compared with investments at subsequent stages.

Most often, initial investments are offered by business angels. These are individual private investors who provide financial and expert assistance at the very first stages of company development. Angel contributions are often made using crowdinvesting platforms (equity crowdfunding) to find investors and startups (Angel List, Venture Angels, Runa Capital, Mangrove Capital Partners, Startup Point, Start Track).

Business angels do not have a large amount of cash and can attract each other as co-investors, forming investment clubs. Contribution to such a club starts from $1,000 per year for an individual and $3,000 for companies. In this case, the return on investment is expressed as a percentage of the enterprise's income.

3. How to find an investor for a project

Ultimately, venture capital investments are much more useful for a new project than simply additional funds for ongoing development. With the right professional interaction, the team will be able to get real benefits in their work:

• Make new useful contacts.
• Choose the right development strategy based on the investor’s past experience.
• Make an assessment of the product being manufactured in terms of its financial attractiveness.

Investors, before investing their money in a startup, carefully analyze the company and its scope of activity. They often give preference to companies that intend to operate in business sectors that are familiar to the investor.

4. Main directions for searching for investments

• Attracting personal connections. In this case, you get a big advantage - a trusting relationship with the investor. However, there is also a negative side - a longer process if you yourself do not know the investor personally.
• Become a member of a business incubator. Business accelerators are special organizations that provide support to new companies for a percentage of future profits or for a certain share of shares. They provide startups with everything they need at the initial stage: premises for work, legal and financial support, and attract additional investments.
• Take part in startup competitions. This is a great chance to communicate with a large number of people at once who are ready to invest their money. Such competitions can be held at the regional, state and international levels. Here you can get funding through grants and cash awards.

5. Difficulties for startups when working with investors

• Since venture capital investment is a very risky undertaking, the investor can leave the company at a difficult time or help sell it to larger market participants. Here he will not pay attention to the interests of the entire team. In this case, it is important for the company to correctly distribute shares in the enterprise in order to ensure a positive outcome when terminating the contract.
• Investors may have hidden intentions to devalue your startup in order to later buy it out or attract valuable team members to work on other projects.
• In the venture investment market, the rules of operation are clearly shaped by the investor-creator. They must be strictly followed. If we are talking about a creative project, then disagreements may arise.

6. How to find a project to invest in

With a smart investment, an investor works with several startups at once. He is immediately prepared for the fact that not every project can bring profit. In practice, only one company out of ten becomes successful. This means that the profitability of the project must be at least ten times the amount of financing. Experienced investors do not wait for proposals from the founders of a startup, but look for them themselves, constantly analyzing the market. Most often, future investors join venture funds.

Such organizations are engaged in building a company’s development strategy in the market, selecting specialists in certain fields, and providing legal support. The objective of the fund is to form a single investment portfolio for investing in a large number of startups. The main difference between a fund and business angels is the use of its own and private funds for investment. The advantage of their activities is the ability to conduct risky activities at the legislative level, including lending to companies. In addition, it is not prohibited to attract each other as co-investors.

Investors often monitor awards and competitions for the best startup so as not to miss out on truly interesting projects. They go to conferences, seminars, presentations. Monitor crowdfunding platforms and thematic blogs.

Difficulties for investors with new projects:

• You have to be patient and clearly see the startup’s prospects. An idea can bring profit both in a year and in ten years. This cannot be predicted in advance.
• The team’s passion for the project idea to the detriment of its profitability causes conflict situations.

7. What documents does the new company provide to the investor?

To attract direct venture capital investments into their project, the creators need to provide documents with their business idea. This list includes:

• Teaser. A brief advertising summary of the project, which describes its main idea, assesses competitors and target audience, and makes forecasts for the next few years. This is the first document that the investor receives.
• Presentation. More detailed description of the startup. Provided if the investor is interested in the teaser.
• Memorandum. Proof of the effectiveness of the strategy and justification of the main provisions presented in the presentation. This is its integral application.
• Description of the financial model. This document details profit generation, cash flow and cost allocation. Most often provided in the form of charts and tables.
• Provisions of the investment agreement. Explanation of the purpose of the funds received, the amount, distribution scheme. The conditions under which the parties can terminate the contract are also separately noted.
• Agreement on cooperation. A document that stipulates the conditions for transferring a stake in a company to an investor. At the initial stage, a preliminary version of it is prepared, since the provisions may change during the work.

With the development of modern technologies, the emergence of venture investments is an absolutely natural phenomenon. This is the most promising mechanism for interaction between investors and creators of startup projects.

Example

In exchange for venture financing of the project in the amount of $1 million, the investor wants to receive 1/3 of the company. After the injections, the value of the business will be $3 million. Initial price: 3 - 1 = $2 million.

Let's say the company placed 500 thousand shares at the initial stage. Then the investor must additionally receive 250 thousand securities in order to acquire 33.33% of the capital. The share price is 1,000,000: 250,000 = 4 million.

Calculation algorithm:

1. Pre-investment value = number of old securities x new price = future value - investment.

2. Post-investment value = pre-investment value + investment = injection: % share in capital = total number of shares x price.

3. Price of securities = injections: number of new securities = pre-investment value: number of all securities (shares, options, guarantors).

4. Price increase = pre-investment cost of issue: post-investment cost of issue.

Development of venture investments in Russia

Although venture capital investments in Russia amount to more than two billion rubles, by global standards this is a small amount. Most often, startups involve international firms and organizations that have received government approval. This primarily reduces risks, but also hinders the investment procedure. It follows from this that venture investments in Russia have not yet reached the world level of development.

There is an acute shortage of private investors in our country. Most investors choose developed companies that can provide certain income guarantees. In Russia there is a startup database where authors post a presentation of their product and can request financial assistance. Online platforms are being created where sponsors can view new projects and decide to invest.

The path to developing venture investments in Russia is not the easiest, but conditions are being created to improve the situation. Special funds are already operating that provide support to investors. With their help, you can avoid risks and increase your income. This creates favorable conditions for business development in the country.

Specifics of business in the Russian Federation

Venture capital funding in Russia lags behind that in the United States. Investor organizations are formed on the initiative of individuals and exist without government support. The most popular is the Moscow Network of Business Angels (MSBA). Although after the financial crises, attention to this source of financing is increasing. TUSRIF, SEAF, Framlington funds have appeared on the market, investing in promising companies. The Russian Technology Fund also began its work, and the Green Grant National Venture Fund was registered by the Russian group Rostinvest. All of them are aimed at financing developing companies.

The first funds in the Russian Federation appeared back in 1994 on the initiative of the EBRD. Over three years, 78 companies were registered. In addition, financial investments in the Russian Federation also came from 16 Eastern European funds. After the events of 1998, only 15 institutions remained.

The work of foundations in Russia is very difficult. There are no legislative acts stimulating the development of this area. The issue of exiting the business (selling venture capital) remains open. There is no need to create new legislation to solve the problem. But it is possible to add management elements to civil acts.

Review of Russian venture investment funds: TOP-12

In Russia, venture funds are very popular, as the number of companies that are ready to invest in start-up projects is constantly increasing. In addition, there are real market veterans who have been working for a long time and have fully earned the trust of investors.

1. Runa Capital. This company works with projects that introduce new ideas in the field of knowledge, experience and skills. This fund works with companies that are engaged in innovative developments in the IT industry.
2. VC actively promotes mobile technologies. It is more focused on the foreign market, although it was founded in Moscow in 2011. Has offices in London and San Francisco. Has invested in more than 40 successful startups. Currently, he actively promotes games on social networks and smart applications for smartphones.
3. Ru-Net Ventures. Has many of its own developments. Area of ​​activity: energy technologies, Internet, outsourcing, automation and integration. Invests in advertising developments and interactive entertainment.
4. Kite Ventures. This fund provides not only financial, but also advisory support to developers. It is popular, although it has often been criticized for the not always successful implementation of new projects. The most successful startups are ZeptoLab, Ostrovok, Trends Brands. If he is interested in the project, I am ready to invest up to $10 million.

5. Well-known Russian foundation. Founded in 2006. Software oriented. The fund's specialists have extensive experience and provide comprehensive support to project authors not only at the launch stage, but also during the growth process. On average, it invests up to $3 million.
6. Russian Ventures. It was launched as a platform with optimal flexibility and quick decision making. It has been working for more than 20 years. Has a capital of $2.5 million. Competently adapts Western experience to Russian realities. A distinctive feature of the fund is determining the attractiveness of a project in 30 minutes. Participating companies include the Ogorod community startup, the Okeo advertising network, and Pluso.ru, a convenient social network builder for webmasters.
7. Addventure II. This fund for investing in the early stages of projects positions itself as a platform for business angels. It offers a huge number of opportunities for investors. You can not only invest capital, but also manage it in the future. The main activity of the fund is crowdfunding, the creation of collective procurement projects, the implementation of ideas in the field of electronics, trade, and the Internet. The most popular implemented project is the joint acquisitions site DARBERY.
8. Foresight Ventures. The investment volume is approximately 10 million dollars. The fund invests up to a million in one project. Participated in the development of applications and games, task service YamLabs. Provides for minimal investor intervention in the management of a new project.

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• Addventure I. Founded in 2008 with starting capital of 300 thousand dollars. The foundation was able to quickly gain momentum thanks to participation in such successful projects as Roomix and MMO. Invests funds in innovative startups at the creation stage.
• RVC. Russian State Fund. Operating since 2009. Invests capital at the project development stage. A prerequisite for his work is the provision of an expanded package of documents for both parties: for the depositor and for the author. This fund is an excellent option for investors who want to be fully involved in developments. He invested in projects such as Membrane Technologies and Ceramic Transformers.

• Softline Venture Partners - the fund was bought by the Softline group of companies, it has belonged to it for 10 years. The main field of activity is projects in the Internet sphere. At the same time, he is involved in a dozen large-scale projects. The fund's capital is more than $20 million. Invests capital only at the first stage of project launch.
• Prostor Capital. This fund entered the market relatively recently, since 2011. It stands out for its very professional approach to investing. The staff employs only highly qualified specialists in the field with extensive experience. The fund often participates in high-profile startups. Projects include the popular “Diary” and Vita Portal.

In addition to the above, there are many more funds that provide all stages of venture investment. Some investors prefer to act directly, contacting companies interested in financial injections directly. In this case, the risks will be higher, but the profits will be greater.

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• 1 Overview 1.1 Strategies

Finally, some interesting facts about venture investing

1. America ranks first in terms of venture investment volumes. Every year, projects totaling about $20–30 billion are financed there. In addition, the country’s legislation contributes to this.
2. No other country in the world has been able to approach such a high figure for the United States. If we add up the volume of venture capital investments from Australia, Israel, Hong Kong and the UK, the figure we get is only $15 billion.
3. In Russia, it is not yet possible to make an objective assessment of the volume of venture investments. There are reasons for this. In our country, venture capital is significantly intertwined with offshore accounts.
4. At the moment, Alibaba is considered the most successful venture project. One day, a Chinese teacher came up with the idea of ​​creating a special platform that would act as a kind of intermediary between the buyer and the seller. Yes, there are external similarities with eBay and Amazon, but there are still a number of differences. For example, this service only works with Chinese goods, and their prices are always fixed. The developer’s very first investors were his friends. It turned out to be a very good investment. In 2015, the site made a profit of $77 billion.
5. Despite Alibaba's success, Chinese firms still find it difficult to compete with American ones. An open and successful venture capital company must initially place its shares publicly available on the stock exchange (IPO). The main indicator is the level of stock prices immediately after entering the stock exchange and some time after. The difference between these numbers serves as an indicator of the success of the enterprise. One successful example is Facebook. If at the stage of entering the market the shares were worth approximately $16 billion, then after that this figure increased to $104 billion.
6. If we talk about successful Russian venture projects, then we can say about Ya. It is worth noting that only Yandex managed to make its shares publicly available. At the IPO, the company's value was $8 billion, later rising to $9.8 billion.

As we can see, venture investments are an excellent way to obtain high profits. By sponsoring new innovative projects with a high degree of risk, you can increase your capital. Private investors invest only their own money in projects. Business angels, in turn, participate in the company’s activities, also investing their knowledge and experience.

Therefore, today in Russia, venture investments are a relatively new, but very promising direction. What does it mean? Many specialized funds are ready to help investors effectively manage their funds and choose only potentially profitable projects. The most popular investments are currently considered to be in high-tech businesses, Internet technologies, and the service sector.

Grade

Before making a financing decision, the investor and entrepreneur must agree on the value of the company. The founders set the price themselves. There is no “market” or “auction” at this stage. Investors, wanting to save money, may abandon the project altogether or team up with potential competitors and make a consolidated offer to management. That is, the price is formed during negotiations. Most often it is set at the level of investor proposals. Financing terms are then discussed and a preliminary agreement is created.

Next, the “pre-investment” and “post-investment” values ​​are determined. The first is the price of the business before the injection of resources. The second is the market value of the organization at the final stage. The parties discuss the share of the investor's share capital. Therefore, calculations begin with the second indicator. Next, the share price is determined.

conclusions

Venture capital funding makes a positive contribution to economic and social development, and for investors it is an opportunity to turn modest investments into multimillion-dollar capital. However, it should be understood that not all venture investors manage to make money on investments in new projects. Moreover, no one can be sure that the idea will take root and become in demand. The only option for diversifying the risks of venture capital investments is to distribute investments across various projects.