BU393 Lecture Notes - Lecture 6: Startup Company
Document Summary
For start-up firms and troubled companies, the public market is often not available. This creates a trend towards private buyouts and the private equity process. Securities are sold via private offering to smaller investments (rather than public markets) and usually relates to non-public offerings of shares in a public company. The biggest drawback is that such securities are not easily resold. Most private placements involve debt securities but could include equity as well. Usually divided into venture equity (start-ups) and non-venture equity (established companies that are in financial distress) Professional pe managers represent large institutional investors such as mutual funds and pension funds. Usually organized as limited partnerships, with institutional investors as limited partners. General partners professional venture capitalists usually charge 2/20-type fees. Usually control at least 1/3 of all board seats and represent the largest voting block. Institutional investors (outside of venture capital firms) strategic acquisitions) Seed-money stage: small amount of money to prove concept or develop a product.
