Many questions arise in connection with venture capital investments. In the following, we provide answers to your most frequest questions. For further information, please contact us.
WHAT IS THE PURPOSE OF A VENTURE CAPITAL INVESTMENT?
The aim of a venture capital investment is to acquire a business share in private companies through a capital increase; to develop and support the companies; and finally, to sell the business share.
DOES THE VENTURE INVESTOR PROVIDE CAPITAL, OR A LOAN?
Venture capital is not a loan. Although the venture capital company can offer loans to its portfolio company, its aim is to acquire a share of the ownership. Because the venture capital company has an ownership stake, it accordingly seeks to provide input and control over the company’s operation.
HOW DOES A VENTURE CAPITAL INVESTOR INVEST IN COMPANIES?
Investments are primarily realized through a capital increase in the target company. The aim of the JEREMIE Programs is to support early-stage companies; therefore, within the framework of JEREMIE, purchasing a share of a business is not possible.
HOW CAN THE INVESTED CAPITAL BE USED?
It can be used for anything that serves the development and growth of the company: such as purchase of equipment and know-how, salaries, or acquisitions that contribute to the company’s growth.
HOW CLOSE IS THE RELATIONSHIP BETWEEN THE VENTURE CAPITAL INVESTOR AND THE PORTFOLIO COMPANY?
Communication is continuous; the venture capital investor is an active co-owner who works closely with the company to provide as much help and support as possible. Management meetings are held regularly, and the company provides periodic controlling reports to the founders and the investors on the company’s operations.
WHAT KIND OF SUPPORT DOES THE VENTURE CAPITAL INVESTOR PROVIDE?
The development of a company requires capital and expertise. Venture capital companies usually set up a team of professionals who support the portfolio companies with their expertise and connections.
HOW DOES THE FUND PLAN TO SELL ITS BUSINESS SHARE? WHAT COOPERATION DOES IT EXPECT FROM THE PORTFOLIO COMPANY?
Exit is the most exciting and at the same time the most difficult part of venture capital investments. Exit strategy negotiations must therefore begin already at the time of the initial investment. The aim of the venture fund management company is to test the value of its business share in the competitive market. Our fund does not support repurchase of the business shares by the founders of the company with a guaranteed yield. Instead, our ideal partners are those who share our goal, which is to sell their companies at the highest possible price.
WHAT DOES THE INVESTMENT PROCESS INVOLVE?
During the investment process, our colleagues and external advisors analyze the investment opportunities. Our Investment Committee makes decisions on the investments. The consent of the Board of Directors is also required before signing contracts. The entire investment process usually takes 4-6 months.
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