Going Beyond traditional PMS — Investing in High Growth Venture Capital Firms
It is well said , that “In today’s complex & dynamic investment market, every individual investor has their own specific investment needs that are based on their risk appetite and goals”.
Despite this fact , many investors continuously seek to maximize their returns while protecting the capital . And it requires management of their investments professionally to achieve specific investment objectives, relieving investor from the day-to-day administrative hassles of investments. This is where the Portfolio Management Services(PMS) comes in picture.
But PMS , is not an easy task as it involves juggling between the limited choices at hand with twin requirements of adequate safety and sizable returns. Because managing investments in equities requires time, knowledge, , experience and for constant investments monitoring,an expert called Portfolio Manager is needed to help manage the investments.
Therefore experts recommend other alternatives to PMS (such as VC Capital Investments) through which the investor can make good returns while mitigating the risks.
For the Indian Investors, investing in Venture Capital via High Growth Venture Capital Firms can be a good alternative & investment strategy, that can make money for them in today`s fast-changing investment scenario.
Technically ,the Venture Capital or VC Firms invest capital to financially support early-stage ,emerging companies, startups ventures. By investing in these new age companies these VC firms get equity ownerships or management control .Beside this, the venture capital invested by VC Firms plays an important role in the next stage of the innovation life cycle of these start up / emerging companies.
But in order for these venture-capital firms to invest in startups, they need funding from individual & institutional investors.
Thus there is good scope for an individual investor to come in and be part of the VC Investment Market.
For a new age Indian investor , it is ideal that they explore the possibility of investing in US based VC firms as the VC Ecosystem of this developed country is very strong & stable.
Also , Silicon Valley being the hub of Venture Capital & Start Ups , USA is recognized as the one of most promising VC Investments markets in the world .
As per recent reports there has been close to $ 48 billion worth of VC Investments in 2014 which is the highest in over last decade. Now compare the same VC market figures of other regions of world , they are no-where near this mark .
With the proliferation of digital platforms , start ups , innovations , the opportunities to invest in US VC Companies & funds are starting to open up to a wider investor audience from countries such as India .
The very best Venture Firms & Funds in the world are from US and they have consistently outperformed the industry & their Global peers and, of course, it’s everyone’s ambition to invest in the top firms & funds .
Beside this ,many of the world successful companies like Apple, Amazon, Google, Hewlett-Packard are financed by the US based venture capital firms .
The scope of investment in US VC Firms can be understood from the fact that long before the individual indian investors have started investing in VC firms , the Top Indians Companies & Corporates Wipro , Infosys , Tata , Airtel have already started investing US VC Firms & Funds.
And the reason Indian firms rely on US VC Firms is that they believe that to broaden their reach in the US Strong & promising start-up ecosystem,which includes one of the best tech / innovative start ups, it is better to invest via VC firm. With them they can evaluate the most promising startups and it gives them broader exposure to new investment hypothesis.
But the big question is How do venture capital firms make money by investing . The answer is that these venture capital firms make money by investing early in a startup company’s life at right time interval. In exchange for investing capital to help the company grow, the fund receives an ownership interest in the company. Because in the early days a company will not be worth a lot , the fund’s ownership interest will be worth exactly what it paid. But as the company grows and becomes more valuable, the value of the fund’s corresponding percentage grows as well.
Furthermore , the investee company will be either sold to a larger company (at a higher price) or begins to sell shares through the public stock market (IPO). In either case, the venture capital firms will sells the shares that it owns, for more money than it originally paid for them.
When these firms makes money from a successful exit , the first thing that happens is that the original investments are returned to the individual investors , complemented with sharing of profits .
Also Venture capital firms raise funds with aim to invest capital in startup companies. The goal of VC Firms is to generate outsized returns by identifying and investing in the most promising innovative companies and profiting from a successful exit event.
One of most important aspects of the VC investments via these firms is the Average Rate of Returns by Venture Capital Investments & VC firms. According to experts , most high growth VCs firms target 20% returns and In a typical VC portfolio, most of the returns are from 20%-30% of the investments.
Another way to look at this is that VC Firms & funds can look forward to returns on 25x to 30x return on average to generate a minimum respectable return to the investor
Generally there is no limit to how much money the VC firms can make for their investor.Take for this noticeable example — There is a VC Firm called Accel Partners, which invested $12.7 million in Facebook when it was evolving-early stages . Then the Facebook IPO came and this VC firm made $2.2 billion interms of valuation , well this is over a 10,000% return and imagine if you invested in this VC Firm which has invested in Facebook . Can you calculate the gains you could have made . Similarly there could have been other cases with companies Google , Amazon , Tesla Motors which have given huge fortunes to the investor.
Another advantage for investor is that by Investing in venture capital they can leverage on the deal-sourcing and portfolio selection capabilities of VC Fund Managers or Venture Capitalists.
Since the Investor confidence in Venture Capital & VC Firms is at all time high ,The timing now seems optimal for Indian Investor in realizing liquidity and making impressive venture returns.
Hence for Indians Investment US High Growth VC firms can be profitable decision and will go long way in wealth creation .
But prior to seeking investing in US VC firms , the Indian investor should evaluate the VC firms in terms of Firm Background , Past Track record etc.
While these are not the only factors that the investors should look for when evaluating investment opportunities in venture capital firms, it’s important for investors to do a comprehensive due diligence.
This can facilitated with the help of some good “ Investment Advisory & Capital Raise Firms” which can have strong network in US , right expertise & a comprehensive due diligence mechanism to advise on the right high growth VC firms & funds in which the Indian investor can invest upon to build great fortunes.
About SeaLink Venture : SeaLink is the leading Capital Raise advisory firm & the eminent player in EB-5 Investor Green Card program for the United States. SeaLink offers competitive offshore investment opportunities in Direct Equity, Preferred Equity, Venture Capital, and Real Estate & Technology funds. SeaLink also brings to you the most elite projects for the safest & fastest route to getting your Green Card