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Why MBS in Venture Investing?
Main Target Users
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Private investors - first-time or would-be
business angels
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Non-financial corporations - first-time or
would-be venture investors
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'Neophyte VC funds' that are at an early stage
and whose teams are managing their first fund
Growing Corporate Venture Capital
In today's
new entrepreneurial economy, the real shareholder value is created by
companies whose corporate strategies include well-developed
venture strategies.
Partnership between small innovative firms and large corporation is mutually
beneficial. While entrepreneurial companies can identify technology
and market opportunities and move faster to capitalize on them, they can
achieve enormous leverage through technology and distribution agreements
with large global corporations.
In United States in 1994, only 2%
of venture capital investments was
corporate
venture capital, but in 2000, corporate venture capital accounted for
17%, nearly $20 billion.
By 2000,
spinouts, a new form of creating and financing a high-tech company has
become more popular. This novel approach has a number of advantages over a
merger or acquisition and it plays an increasingly high role for high-tech
companies.
Growing Market of Business
Angels – Early Stage Private Investors
As investments of formal venture
capital (VC) companies in early stage start-up companies have been
decreasing since 1999, the role of private venture capital investors, such
as
business angels, has been increasing. In US, the average VC funding per
deal grown from US$ 2.7 million in 1994 to US$ 13 million in 2000. These
days, VC companies prefer to invest in larger deals at a later development
stage. At the same time, the number of business angels in growing. In US, in
2000, business angels put US$ 40 billion behind 50,000 deals. The number of
business angels in US is estimated to be 400,000. This number grows at an
average rate of 20% per year. In Europe, the estimated potential of annual
angel investment is as high as US$ 30 billion.
Though the investment potential of
business angels is significant, the size of the angel market could
potentially become 10 to 20 times larger. It is estimated that only 7% of
potential business angels in US invest in start-up ventures. The remaining
93% are virgin angels who would like to invest but don't do it for a number
of reasons. Main reasons why business angels do not do more investment are:
lack of proposals matching their
investment criteria
lack of quality business proposals
lack of trust in the entrepreneur or
management team
lack of experience in
valuating and pricing deals, and
lack of experience in
due diligence and monitoring.
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