The essence and organization of venture financing. Venture financing of an investment project. This type of activity has a number of advantages

The role and place of venture funds in solving social and economic problems. The main directions of the formation of the profitable part of venture capital funds and the direction of using funds. Venture company as a governing body, goals and objectives.

VENTURE FINANCING

One of the main sources of financing for innovative projects is venture capital.

Venture (risk) capital - a form of capital investment in investment objects with a high level of risk, counting on the rapid receipt of a high rate of return. Venture capital is formed to finance venture capital companies, which are business cooperation of the company's owners with the owners of venture capital to implement high-risk projects in order to obtain significant (above the market average) income.

Venture capital financing consists of financing investments in new areas of activity, therefore it comes with a high risk in exchange for generating significant income.

A venture capital enterprise is an enterprise whose activities are related to the development of new types of products, services, technologies that are unknown to the consumer, but have a large market potential, which is associated with a high degree of risk of their promotion in the market. However, the innovation of their activities provides a high income.

Venture financing is based on a preliminary assessment of the investment project, activities and financial condition of the company implementing this innovative project. Venture financing is carried out in the form of corporatization.

Venture funds are created to finance venture capitalists. The investment resources of a venture fund are intended for venture capital companies that have a great chance of growing into large profitable enterprises. These odds are combined with high risk. Therefore, a venture fund is characterized by the distribution of risk between project initiators and investors.

Insurance is one of the main ways to protect against investment risks. This also applies to venture capital financing. The mechanisms for organizing insurance and guarantees of attracted investment resources for venture projects include the creation of a system of state insurance of risks of venture investors.

The main principles of a venture fund are:

1) the creation of a venture capital fund in the form of a partnership, in which the organizer is fully responsible for the use of the fund's resources. For this, a business plan is developed;

2) placement of the venture fund's funds on various projects with a risk degree of no more than 25% and with a return on investment not exceeding 3-5 years;

3) "exit" of venture capital from the venture by transforming it into an open joint stock company with the placement of shares of the venture capital on the stock exchange or selling them to a large corporation.

Question 42. Foreign investments, their role in the country's economy.

Entrepreneurial investment . Direct, portfolio and other investments.

Direct foreign investments The rights of foreign investors in the management of an enterprise on the territory of another state.

Portfolio investment. Investor's rights to receive income and control over investment objects.

Other investments.

Conventionality of quantitative boundaries between direct and portfolio investments in the world economy.

The priority importance of direct investments, their significant impact on national economies and international business in general. The role of foreign direct investment.

FOREIGN INVESTMENT

Foreign investments highlight:

1) state foreign investments carried out by state budgets (state loans, loans, grants, financial assistance);

- private foreign investment - the investment of foreign investors in investment objects located outside the country;

- mixed foreign investments - investments made outside the country jointly by the state and private investors.

Foreign direct investment the acquisition by the investor of at least 10% of a share, stakes (contribution) in the authorized (pooled) capital of a commercial organization created or newly created in the territory of the Russian Federation in the form of a business partnership or company in accordance with the law of the Russian Federation; capital investment in the fixed assets of a branch of a foreign legal entity established on the territory of the Russian Federation; leasing equipment on the territory of the Russian Federation by a foreign investor with a customs value of at least 1 million rubles.

Portfolio foreign investment - capital investments in shares that do not give investors the right to influence the activities of the enterprise, amounting to less than 10% of the total share capital; investments in bonds, bills of exchange, other debt obligations, state and municipal securities.

Other investments include deposits in banks, commodity loans, etc.

Among the listed types of investments, priority is given to direct foreign investments, since they have a beneficial effect on the development of the country's economy:

- contribute to the growth of investment activity in the country;

- stimulate investments in the renovation and development of the main production;

- contribute to the introduction of advanced management, science and technology achievements in production;

- intensify competition and stimulate the development of small and medium-sized businesses;

- ensure the growth of employment of the population, increase in the income of the population;

- ensure the growth of tax revenues to the budget of the host country, etc.

Despite the efforts of the Russian Federation, the state of the investment climate in the country cannot be considered attractive for foreign investors. The investment attractiveness of the Russian economy for foreign investors is ensured by a variety of qualitative parameters:

- a vast national market, a wide variety of investment objects, the economic growth that began in the country;

- availability of highly qualified and relatively cheap labor force;

- the presence of a variety of rich natural resources;

- reforming the taxation system in terms of reducing the tax burden, etc.

DEPARTMENT OF FINANCE AND STATISTICS
Course work
By discipline: "Investments"
On the topic: "Venture financing"

Completed by the student:
Petrova M.V.
FK43 groups
Supervisor:

Moscow2011

Content:
Introduction ……………………………………………………………………………… ..2
1. Venture funding; …………………………………………………… ..4
1.1 Definition of venture financing; ……………………………………………………… ........................ ..6
1.2 Features of venture financing …………………………………………………………………… ..… ..8
1.3 The essence of venture capital financing ………………………………………………………………. ……… .13
2. Venture financing in Russia ……………………………………………………………………………. …… .14
2.1. The history of the development of venture capital financing in Russia …………………………………………………………… ……………. …… .16
3. Mechanisms of venture (risk) financing: world experience and development prospects in Russia ……………………………………………………………………………………………. …… ..21
4. Trends and opportunities for the development of venture capital financing in Russia ………………………………………………………………………………… ..25
Conclusion ……………………………………………………………………………… 28
Appendix ……………………………………………………………………………… 30
References …………………………………………………… …………… 32

Introduction
Attracting equity capital to small and medium-sized private companies as a phenomenon and process was not known in post-perestroika Russia until recently. The free capital market has not yet developed in our country, so the majority of small and medium-sized entrepreneurs in Russia believe that there is still nothing to attract. At first, great hopes were pinned on foreign investment, but over time, the Russian entrepreneur realizes the futility and loss of this option.
The active penetration of foreign capital into the Russian market, accompanied by an outflow of national capital outside the country, gives rise to many problems of an economic, social and psychological nature. Meanwhile, the integration of the Russian economy into the world economic space is an irreversible process. The principles and ethics of civilized business penetrate deeper and deeper into the minds of Russian entrepreneurs and their daily business practices.
State policy in relation to small and medium-sized businesses (in fact, like business in general) is also still far from perfect. The confrontation between the state and society most painfully affects those who decided to start their own business, often from scratch, from scratch. These people have to live and work in a hostile environment. The feeling of insecurity gives rise to unbelief and apathy in some, while in others, on the contrary, it fosters character and fighting qualities - the key to the success of any undertaking. The underdevelopment of the business infrastructure in Russia, combined with information impenetrability and the remnants of the country's many years of isolation from the rest of the world in the minds of many entrepreneurs, prevent them from seeing that a new financial industry is already operating in Russia today - venture capital.
Venture capital or venture capital is a phenomenon that the vast majority of Russians do not understand. It is confused with bank lending or charity. There is practically no information about the nature and activities of venture funds and companies, apart from a few confusing notes in Moscow and St. Petersburg publications.
The name "venture" comes from the English "venture" - a risky venture or undertaking. "During the perestroika era, joint ventures were also called" joint ventures ", which, perhaps, would be more correctly translated as" joint venture. "The very term" risky " implies that there is an element of adventurism in the relationship between a capitalist investor and an entrepreneur who claims to receive money from him, and this is actually the case.
At present, civilized economic relations are being formed in the Russian economy, the stock market is developing, the banking system is developing, and large private enterprises appear and develop. The development of civilized market conditions based on private entrepreneurship leads to the formation of alternative sources of funds - venture investments - investments in high-risk projects, or in venture innovative projects.
Venture entrepreneurship, promoting the creation of new and modernization of existing industries based on the use of the achievements of science and technology, is a tool for the development and support of the real sector of the economy, a means of accelerating the development of private innovative entrepreneurship, a tool of positive influence on the national economy. Ventures are the first venture exporters to enter the market for radical innovation. This applies to all industries - biotechnology, telecommunications, communications, computer technology, industry, etc.
The purpose of this course work is to consider what venture financing is, features, essence, history of venture financing in Russia. Mechanisms, as well as trends and the possibility of its development in Russia.

1. Venture financing.
VENTURE FINANCING - the allocation of funds from venture (risk) capital to small research or implementation firms to develop, fine-tune and introduce innovations that are risky but promising. As a rule, owners of money capital, presenting loans to inventors and entrepreneurs, cannot make claims against them for collateral against a loan or demand guarantees from them that they will enter the market with innovations on a timely basis, receive a profit and repay debts with interest.
One of the main sources of financing for innovative projects is venture capital.
Venture capital (risk capital) is a form of capital investment in investment objects with a high level of risk, counting on the rapid receipt of a high rate of return.
Venture capital is formed to finance venture capital companies, which are business cooperation of the company's owners with the owners of venture capital to implement high-risk projects in order to obtain significant (above the market average) income.
Venture financing consists of financing investments in new areas of activity, therefore it comes with a high risk in exchange for generating significant income.
A venture capital enterprise is an enterprise whose activities are related to the development of new types of products, services, technologies that are unknown to the consumer, but have a large market potential, which is associated with a high degree of risk of their promotion in the market. However, the innovation of their activities provides a high income.
Venture financing is based on a preliminary assessment of the investment project, activities and financial condition of the company implementing this innovative project.
Venture financing is carried out in the form of corporatization.
Venture funds are created to finance venture capitalists. The investment resources of a venture fund are intended for venture capital companies that have a great chance of growing into large profitable enterprises. These odds are combined with high risk.
Therefore, a venture fund is characterized by the distribution of risk between project initiators and investors.
Insurance is one of the main ways to protect against investment risks. This also applies to venture capital financing. The mechanisms for organizing insurance and guarantees of attracted investment resources for venture projects include the creation of a system of state insurance of risks of venture investors.
The main principles of a venture fund are:
1) the creation of a venture capital fund in the form of a partnership, in which the organizer is fully responsible for the use of the funds of the fund. For this, a business plan is developed;
2) placement of venture capital funds on various projects with a risk degree of no more than 25% and with a return on investment not exceeding 3-5 years;
3) "exit" of venture capital from the venture by transforming it into an open joint stock company with the placement of shares of the venture capital on the stock exchange or selling them to a large corporation.

1.1 Definition of venture capital financing.
There are many definitions of what venture financing is, but they all, in one way or another, boil down to its functional task: to promote the growth of a particular business by providing a certain amount of money in exchange for a share in the authorized capital or a certain block of shares.

A venture capitalist at the head of a fund or company does not invest its own funds in the companies in which it acquires shares.

Venture capitalist - it is an intermediary between syndicated (collective) investors and an entrepreneur.

This is one of the most fundamental features of this type of investment. On the one hand, a venture capitalist independently decides on the choice of a particular object for investment, participates in the work of the board of directors, and in every possible way contributes to the growth and expansion of the company's business.
On the other hand, the final decision on the production of investments is made by the investment committee representing the interests of investors. Ultimately, the profit received by the venture investor belongs only to the investors, not to him personally. He has the right to count only on a part of this profit if he has a part of the business.

These principles were laid down in the early stages of venture capital formation by the founding fathers of this business - Tom Perkins, Eugene Kleiner, Frank Caufield, Brook Byers, and others.

In the 50-60s, they developed new fundamental concepts for organizing financing: creating partnerships in the form of venture funds, collecting money from limited partners and establishing rules for protecting their interests, using the status of a general partner. This organizational design of the investment process was innovative for America in the mid-20th century and created a very significant competitive advantage.

Tom Perkins himself described this process as follows: “Looking back, I think that what we invented then was right. First of all, we have always remembered and realized that our limited partners were the source of our capital, therefore, we initially developed a set of rules that protected their interests.For example, until today, no general partner can have a personal investment in a company that partners may be interested in, even if they eventually abandon it. This principle ensures that there is no conflict between our personal interests and our interests as partners.Even if any of us, as a member of the board of directors, has the opportunity to purchase a portion of the shares at a preferential price, we are obliged to transfer them to our partners in order to they could also benefit from it.Also, unlike other venture capital funds, we never reinvested profits. All profits are immediate. It was distributed among our limited partners and thus all our funds ceased to exist. Our investors loved it. Another principle was that newly created funds did not have the right to invest in those companies where our earlier funds invested money ... ".

These principles remain largely unchanged to this day. The organizational structure of a typical venture capital institution is as follows.
It can be formed either as an independent company, or exist as an unregistered entity as a limited partnership (something like a "full" or "limited" partnership, to use Russian legal terminology). In some countries, the term “fund” is understood as an association of partners rather than a company as such. The directors and management personnel of the fund can be hired either by the fund itself, or by a separate "management company" or by a fund manager providing services to the fund. The management company is usually entitled to an annual management charge, usually up to 2.5% of the investor's initial commitments.

In addition, the management company or individuals, employees of the management staff, as well as the general partner can count on the so-called "carried interest" - a percentage of the fund's profits, usually reaching 20%. More often than not, this percentage is not paid until the investors have been fully reimbursed for their investment in the fund and, in addition, a pre-agreed return on their investment.
In the case of a limited partnership, the founders of the fund and the investors are limited partners. In this case, the general partner is responsible for managing the venture fund or exercises control over the work of the manager. Limited partnerships are tax free. This means that it is not subject to taxation, and its participants must pay all the same taxes that they would pay if their income or profits came directly from the companies where they independently invested their funds.

1.2. Features of venture financing

Venture financing is associated with mutual investments in shares, that is, with risk and stock market play.
The venture capitalist does not invest directly in the company, but in its share capital, the other part of which is the intellectual property of the founders of the new company.
Investments are made in companies whose shares are not yet listed on the stock exchange.
Venture capital is directed to small high-tech companies focused on the development and release of new high-tech products.
Venture capital is provided to new high-tech companies for medium to long term and cannot be withdrawn by the venture capitalist at will until the end of the company's life cycle.
Venture funding is provided primarily to companies with potential growth potential, rather than to companies already generating high returns.
Venture capital is channeled into supporting non-traditional (new and sometimes completely original) companies, which, on the one hand, increases the risk, and, on the other hand, increases the likelihood of ultra-high returns.
Venture capital investment in exclusive small high-tech companies is dictated by the desire not only to obtain higher incomes compared to investments in other projects, but also by the desire to create new sales markets, taking a dominant position in them.
Venture investments are not provided forever, but only for a certain period of time.
Venture financing is a kind of loan to new companies, a long-term loan without obtaining guarantees, but at a higher percentage than in banks.
A venture capitalist investing in a new small company must decide in advance how he is going to exercise his right to profit. In other words, it must determine how it will exit the investment at the end of the life cycle of the financed company (in 5-7 years).
As the company develops, its assets and liquidity increase, both due to the emergence of demand for unlisted shares, and in connection with the emerging competition between those wishing to acquire a new profitable business.
The success of the development of an invested small company is determined by the growth in the price of its shares, the reality of a profitable sale of the company or part of it, as well as the possibility of registering the company on the stock exchange with the subsequent profitable purchase and sale of shares on the stock market.
The mutual interest of the founders of the company and investors in the successful and dynamic development of a new business is associated not only with the likelihood of high income, but also with the opportunity to become a participant in the creation of a new progressive technology that stimulates the scientific and technological progress of the country.
The role of an investor in the successful development of a new company is not limited only to the timely provision of venture capital, but also includes the investment of his business experience and business relationships, which contribute to the expansion of the company, the emergence of new contacts, partners and sales markets.

1.3. The essence of venture capital financing.
Today, very few domestic firms and entrepreneurs practice raising venture capital. According to opinion polls, only an insignificant part of entrepreneurs is aware of venture investment. An even smaller part has objective and reliable information about the mechanisms of venture investment. Consequently, there is a need to popularize venture investing, training in venture financing methods and attracting venture capital.
Venture capital is an economic instrument used to finance the commissioning of a company, its development, takeover or buyout by an investor in the course of property restructuring. The investor provides the firm with the required funds by investing them in the authorized capital and (or) allocating a tied loan. For this, he receives a specified share (not necessarily in the form of a controlling stake) in the authorized capital of the company, which he retains until he sells it and receives the profit due to him. "
The essence of venture capital is manifested through its functions, which include:
- Scientific and production function... It is aimed at promoting a technological breakthrough, at developing innovative and business activity, which ultimately contributes to the economic innovative growth of economic systems.
- Function of commercialization of scientific, technical and innovation activities.
etc.................

There are many definitions of venture capital financing, but in any case, they all boil down to its functional task: to promote the growth of a particular business by providing certain amounts of funds in exchange for a share in the authorized capital or any block of shares.

Venture capital is a long-term, risk capital that is invested in the stocks of newly created and fast-growing organizations with the aim of obtaining high returns.

The name "venture" comes from the English "venture" - "venture or undertaking". The very term "risky" means that there is great risk in the relationship between the investor who owns the capital and the entrepreneur who claims to receive money from him. "Venture" ("venture") capital is often confused with bank lending or charities.

The goal of venture capital financing is to generate ultra-high returns on capital investment. The investor receives this profit in the form of a return after n-th number of years by selling the increased shares or shares of a prosperous company to business partners in the open market or to a large firm that works in the same field as a developing company.

But venture financing of investment projects, unlike bank lending, is almost always carried out in small and medium-sized private or privatized enterprises without providing any collateral or mortgage. Venture funds or companies prefer to invest in enterprises whose shares are not traded freely on the stock market, but are fully distributed among shareholders - individuals or legal entities. Investments come either in the equity capital of closed or open joint-stock companies in exchange for a share or block of shares, or are provided in the form of an investment loan, which is most often a medium-term by the standards of Western analysts: from 3 to 7 years.

In life, of course, the most common form of venture financing for investment projects occurs, in which part of the funds are directed to equity capital, and the other is contributed in the form of an investment loan.

Venture capital investment is a specific financial instrument that aims to accelerate the development of industries characterized by high added value and dynamically growing new markets.

The advantages of venture investment, as the main source of financing in the field of small and medium-sized innovative businesses, lie in its two features:

1. A developing company can receive investments when other financial sources refrain from risky investments (in the absence of stable cash flows and collateral).

2. This type of financing, to a greater extent than any other, eliminates the contradictions between the investor and the entrepreneur, since in its nature the foundations are laid for combining goals and objectives to increase the value of a business both for entrepreneurship - a socially useful type of activity, and for capital - funds implementation of entrepreneurship.

The subjects of venture financing are: financial acceptors - venture capital companies and start-up entrepreneurs; financial donors - individuals, companies and specialized funds; financial and information intermediaries providing communication between representatives of the first two groups.

Venture investment objects are companies capable, in the opinion of a venture capitalist, of a rapid increase in their own market value through the development and implementation of innovations or reengineering of business processes.

Speaking of venture funding, it is worth mentioning the differences from other types of funding:

The first fundamental difference is that in the case of venture financing, the necessary funds can be provided for a promising idea without guaranteed provision of the entrepreneur's existing property, savings or other assets. The only pledge is a specially negotiated share of an already existing or newly created company. Moreover, unlike traditional direct investments, from the very beginning, the possibility of loss of invested funds is allowed if the financed project does not bring the expected results after its implementation. Venture capital investors go along with the entrepreneur to share all responsibility and financial risk.

The active participation of investors in the management of financed projects at all stages of their implementation, starting with the examination of still “raw” entrepreneurial ideas and ending with ensuring the liquidity of the shares of the newly created company, is the second fundamental difference between the venture business and ordinary operations for issuing commercial loans.

The third fundamental difference is related to the fact that venture capital funds, like no other investor (except perhaps the state) are ready to invest in new science-intensive developments. Even when they are accompanied by a high degree of uncertainty. Indeed, it is here that the largest potential profit margin is hidden.

Features of venture financing:

1. Venture financing is associated with mutual investments in shares, that is, with risk and stock market play.

2. The venture capitalist invests his funds not directly in the company, but in its share capital, the other part of which is the intellectual property of the founders of the new company.

3. Investments are made in companies whose shares are not yet listed on the stock exchange.

4. Venture capital is directed to small high-tech companies focused on the development and release of new science-intensive products.

5. Venture capital is provided to new high-tech companies for medium to long term and cannot be withdrawn by the venture capitalist at will until the end of the company's life cycle.

6. Venture funding is provided primarily to companies with potential growth potential, and not to companies that are already generating high profits.

7. Venture capital is directed to support non-traditional (new, and sometimes completely original) companies, which, on the one hand, increases the risk, and, on the other hand, increases the likelihood of ultra-high returns.

8. Venture capital investment in exclusive small high-tech companies is dictated by the desire not only to get higher incomes compared to investments in other projects, but also by the desire to create new sales markets, taking a dominant position in them.

9. Venture investments are provided not forever, but only for a certain time.

10. Venture financing is a kind of loan to new companies, a long-term loan without guarantees, but at a higher interest rate than in banks.

Since the decisive role in the success of an enterprise often belongs not so much to the idea underlying the product and technology as to the quality of enterprise management, the venture capitalist delves less into the intricacies of a scientific idea, preferring to conduct a detailed assessment of the potential capitalization of this idea and the organizational skills of the head and management of the company. ...

From the above, we can conclude that venture financing is a kind of investment in new high-tech companies to ensure their formation, growth and development in order to make a profit in case of successful project implementation. That is, this is a high-risk investment of private capital in high-tech small companies that are capable of producing high-demand science-intensive products or services in the future.

There are many types of investment, differing in terms, industries, properties of capital. One of the types of investment is venture financing of projects (). What is the peculiarity of this type of investment?

Venture investment belongs to the group of high-risk investments. The essence of these financial injections is that the money is invested in the authorized capital of developing enterprises that are engaged (or are going to be engaged in) the development of high-tech projects.
Large companies that receive stable profits are not interested in such investors.

Venture capital structure

As already mentioned, this type of financing is a high-risk long-term investment. All that a potential investor is interested in is newly created small and medium-sized businesses, whose main task is to develop and introduce new technologies. Of course, provided that these technological solutions will be in high demand in the market in the future. The investor's goal is to make a profit several times higher than the money invested in the project in a few years.

Naturally, venture funding is not available to all newly created companies. There is a fairly clear ranking of enterprises that can apply for funding:

1. The first are organizations that have a ready-made idea, but do not have the funds for further research.
2. Newly created companies with ready-made technological developments, but unable to establish a trial release of the product.
3. Enterprises whose products have already been tested and are ready to release products to the market.
4. Operating enterprises with ready-made technological solutions, launching their products on the market, but in need of financing. Cash injections are needed to expand the scope of activities, develop new technologies, and conduct additional research.

This classification does not guarantee that all companies meeting the listed data will immediately receive venture funding. Investors are not really looking for potential partners. In order to receive financial injections, it is the newly developing companies that must themselves look for an investor. How does this happen? By searching through acquaintances, friends, the Internet. What you need to provide an investor: a decent business plan with a development strategy for several years ahead.

If many start-up entrepreneurs think that with such a business plan it is possible to go to a bank and get a loan, they are greatly mistaken (by the way). The time when such schemes worked remained in the nineties of the last century. Today, no bank will undertake to finance a high-risk project that does not guarantee a solid profit at the initial stage. Venture investment, while being similar to bank lending, differs precisely in that the investor is ready to take risks and invest in such a project.

The investment scheme is quite simple and transparent. Venture financing of investment projects is as follows:

1. A small business with an innovative project goes to a potential investor. The purpose of the enterprise is to obtain financing for the development and implementation of high-tech solutions that can ensure constant demand in the market. At a minimum, such an enterprise should interest the investor not only with an innovative idea, but also with a competent business plan.
2. If the investor is interested in the proposal, the details of future cooperation are discussed. Financing can be carried out by injecting funds into the company's share capital or in the form of loans (for a long term at a minimum interest). At the same stage, issues of distribution of future profits are discussed. The peculiarities of venture financing are that a potential investor is interested not only in an innovative project that should be financed. Investors pay great attention to the organization of the enterprise's work. After all, it is the competent management and the correct distribution of the funds received that ultimately affect the work on the introduction of new technologies.
3. After the company takes a leading position in the market, the liquidity of the shares increases, and the profit increases, it is time for the distribution of income. For example, an investor can simply sell his block of shares to the company at the end of the project (provided that they rise in price). In general, a project can be considered profitable if it is possible to receive a profit of 20 to 50% approximately 5-7 years after the start of investment.

Types of investors

There are two main types of venture capital investors:

1. Venture funds, which are formed with the assistance of several investment funds.
2. Business angels, that is, single investors. Roughly speaking, this category includes large entrepreneurs.

Venture funds have accumulated (total) capital at their disposal, which is distributed among investment projects. All members of the foundation are divided into two categories:

1. Main partners who control and distribute financial flows. The share of the main partners in the venture fund is no more than 20%.
2. Limited partners who directly invest in the fund, but do not have the right to dispose of the funds. Their share in the fund can reach 80%.

Venture funds, in turn, are divided into:

1. Specialized ones that finance only in a specific industry or in a specific region (country).
2. Universal, which diversify financial investments in completely different industries.

Venture funds finance a wide variety of companies at different stages of their existence. Such organizations are willing to invest in barely opened companies or in enterprises that are just planning their activities (seed investment). But preference is given to all the same existing companies that have a ready-made and tested project, the so-called "start-up" companies. If an operating company plans to expand its scope of activity and enter the market with a new proposal, a venture capital fund will definitely finance such an undertaking.

Today, there are a large number of corporate funds on the market, which unite under their wing many small organizations and companies operating in the field of innovative technologies. Consolidation of diverse companies enables corporate funds to minimize possible risks by diversifying investment interests.

Now about the so-called business angels. These include large entrepreneurs or wealthy people who provide venture funding for all the same small businesses and start-up companies. The difference between business angels and venture funds is that the process of receiving funds from individuals is much faster, the terms of return are sparing, and the interest on invested capital is lower than that of funds.

Venture investment risk

Since the main point of investing is to place finance in the share capital of an organization, the most important risk is the possible illiquidity of shares in the future. In short, where there is a stock turnover, there is always the risk of a shortfall in profit or direct loss.

A venture capitalist finances a venture that is not yet listed on the stock exchange. The peculiarities of venture financing are that such projects are designed for a long term, so it is almost impossible to predict the possibility of making a profit at the initial stage. It all depends on the instinct of the investor himself. Moreover, the investor often cannot withdraw the money invested in the project until the end of the contract.

The risk is also due to the fact that this kind of investment is always aimed at the development and implementation of new technologies, often quite unusual. Such projects, of course, are able to bring a decent profit, but there is also a high probability of failure of the developed idea.

Venture investing is similar to bank lending. The only difference is that the interest in investing is much higher. But this is balanced by the fact that there are no guarantees in such an investment.

Venture investment in Russia

Although it is generally believed that the birthplace of this type of investment is America, in Russia venture capital financing was almost always present. The most striking example is developments in the field of the military-industrial complex of Russia. It is thanks to venture funding that the country's military complex has reached significant heights. Naturally, the investment was carried out not with the support of private foundations and individuals, but directly from the state budget.

An attempt to create venture capital funds in Russia was made back in 1994-1995. For a number of reasons, the development of private investment for the introduction of innovative technologies in Russia did not find the proper response. Venture financing in Russia was carried out by funds that had in their composition the majority of capital of foreign origin. To put it simply, the developments successfully brought profit to Western investors, or even went abroad altogether. The reason is the weak material and technical equipment and the lack of tax incentives for Russian enterprises implementing advanced technologies.

Today, the problems of venture financing in Russia lie in the wrong approach of the investors themselves. The main snag is that the Russian economy is currently not stable, it is not entirely correct to talk about projects that can be implemented in 5-7 years. In addition, funds that could invest funds require from Russian enterprises not only fresh technological solutions, but also well-organized production. Simply put, in order to receive funds from a fund, you need to show the results of a finished product that has received encouragement from a wide range of buyers. With this approach, the very idea of \u200b\u200bventure investing simply loses its meaning.

However, given the presence of many people with high scientific and technical potential, one can hope that there will be business angels who can adequately assess the proposed business projects and promote the development of new technologies through venture financing of small enterprises.

Venture funding is an investment in an innovative business in the early stages of its development. Venture capital financing originated in the United States and has become widespread throughout the world. This type of financing is characterized by a high level of risk.

The point of venture financing is that an investor invests small, by his standards, amounts in several projects (startups) that can potentially grow to the size of a large corporation. At the same time, the investor understands that most of the projects will go bankrupt, but those one or two businesses that can grow and scale their activities will cover all the investor's expenses.

For businesses, venture funding is an indispensable means of raising money for its activities before the firm can generate profits on its own.

Subjects of venture financing

Startups

Companies at an early stage of development act as donors - startups... These firms can exist both at the level of an idea on paper and at the level of a business that has a certain revenue and even profit.

Key characteristics of startups:

• 1. Innovation;
• 2. The business model is being tested;
• 3. Business is in its infancy.

We need to distinguish between startups and small businesses. A flower shop or bakery is not a startup because it uses proven, well-known business models. Also, startups are not innovative divisions of large corporations, since these enterprise business models have long been debugged and innovation is only a part of their business.

Most often, startups emerge in the IT industry due to the general innovativeness of this industry, as well as the low threshold for entering the Internet business. Young enterprises are also emerging in a number of other knowledge-intensive industries: pharmaceutical, engineering, biological, etc.

Investors

Venture investors are divided into types as shown in the table.

Name Organizational form Characteristics

Business angels Private investors or groups of investors Fund startups at the earliest stages of development (starting from the idea)

Presowing and seed funds Business structures Fund startups in the early stages of testing a business model

Venture funds Large business structures Provide financing at the stage of scaling the business model

Business angels are wealthy people who invest their money in startups in the hope of making a profit. There are business angels who invest professionally who have made it their main occupation. There are also angels on the market, for whom investing in innovative firms is just a way to diversify their investment portfolio. For startups, professional business angels with industry expertise are preferable, because they will be able to provide a young company not only with financing, but also with connections and recommendations for business development. A good business angel, on the one hand, participates in the management of the company, on the other hand, it allows startups to make decisions on their own. The most famous business angels in Russia are:

1. Igor Ryabenky;
2. Arkady Moreinis;
3. Pavel Cherkashin;
4. Alexander Galitsky.

Venture funds are investment funds that invest in startups at various stages, from pre-seed to late rounds of venture funding. The fund's task is to make a profit.

The activities of any fund can be broken down into the following stages:

1. The fund attracts funds from a number of investors, including wealthy people, business structures, and sometimes budget funds.
2. The fund analyzes the market and invests in several startups (usually at least 10) by purchasing stakes in these firms. At the same time, the prospects of the business model, the personalities of the founders, and the financial performance of a young company are analyzed.
3. The fund participates in the management of funded start-ups called portfolio companies. The fund's task is to bring the maximum number of its portfolio companies into profit. The investment cycle of a venture fund is 4-7 years.
4. The fund exits from portfolio companies. This is the most important stage in the fund's activities, because right now it is making a profit. The way out is selling the shares bought by the fund at a significantly higher price, because startups have grown. The difference in the price of buying and selling shares in successful startups can vary by tens or even hundreds of times.

In the activities of funds, the stage of ruin of a part of portfolio companies is inevitable. But if out of 10 portfolio companies of the fund, in each of which the fund invested $ 100,000, there is at least one Facebook or Twitter, the fund will make a profit that compensates for investments in unprofitable firms. The task of the fund is to compose an investment portfolio and manage it in such a way in order to ultimately receive income.

There are also foundations of funds - these are large organizations that fund and manage venture funds. In Russia, such an organization is the state fund RVC - Russian Venture Company. This structure is engaged not only in investing in promising startups, but also acts as an institution for the development of the venture capital industry in our country.

The most active venture funds in Russia:

1. Altair Capital;
2. Almaz Capital;
3. Runa Capital
4. TMT Investments
5. Flint Capital
6. Maxfield Capital
7. ImpulseVC

Other structures

In addition to investors and start-ups, there are a number of public and private organizations that provide infrastructure and information support to the venture capital industry.

Business incubators provide startups with the opportunity to rent an office or coworking space at an inexpensive price, provide technical infrastructure and information support. They often act as a link between startups and investors. Business incubators are either state-owned and provide services for free, or they charge small fees from startups. Typically, incubators do not require a share in the business for their help.

Startup accelerators help young firms at a very early stage of development... The activity of accelerators is somewhat similar to the work of business angels, but accelerators do not always take a share. Accelerators perform primarily an educational function. A typical accelerator recruits several start-up teams into training groups and trains them for 3-6 months, helps them bring the product to market and validate the business model, provides the necessary connections, and then introduces them to investors. The goal of accelerators is to bring startups to the market that are ready for investment from angels or funds.

Investment brokers and consultants work with both startups and investors. They provide market participants with information, introduce them to each other, help startups "package" a business idea and correctly submit it to an investor. Among investors, the attitude towards such consultants is twofold, some investors believe that if someone leads the founders of startups "by the hand", then such startups will not be successful.

Industry organizations and associations. There are a number of associations and organizations on the market that help both investors and startups.

Examples include:

1. RAWI - Russian Venture Investment Association. It unites the leading market players, aims to promote the development of the venture capital industry in our country.

2. Rusbase is a platform that brings together Russian investors and startups.

3. Crunchbase is the world's largest venture capital market database of young firms and investors.

Stage Characteristics Types of investors Average investment volumes

Pre-seed A startup exists at the level of a business idea. Business Angels Up to $ 10,000

Seed Startup is testing a business idea Business angels, seed funds $ 10,000 - 50,000

Venture rounds Startup scales a business idea Venture funds From $ 50,000

The parameters of the stages of venture financing differ slightly in different literature, but it is possible to clearly distinguish between the stages at which an unrealized business idea or an idea at the initial implementation level (preseeding and seeding) is financed and the stages of financing already mature startups that scale their business model (investment rounds).

In the classical model, venture financing is followed by Private Equity (direct investment), and then - IPO. Private equity funds are invested in mature organizations with a tried and tested business model to scale these businesses further. IPO (Initial public offering) is an entry into the stock exchange, the issuance of its own shares by a company and the transformation of the company into a public one. Any venture investor is interested in getting their funds back and IPO or Private Equity are good tools for this.

Impact on the economy and technology

Venture financing is a tool that helps young innovative companies to develop, which will never receive a loan from a bank and do not have serious start-up capital. Venture has played a colossal role in the development of global technologies, and it is thanks to venture funding that such giants as Google, Facebook, Twitter and a number of other companies have emerged. In Russia, the venture capital market is in its infancy.