Earnings on venture investments
Innovations and inventions are the most effective incentives that drive the economy of any country. “Most of its driving force has recently been made up of quick or garage startups. These are companies that were created without huge financial investments at the initial stage, so this is a great opportunity to earn or even break the jackpot, ”the creators of the media platform about making money on the Internet Ruscash say.
Among the well-known "garage" startups, it is worth noting Google, Twitter, Microsoft, Apple, Amazon - these are only the most striking and famous among them. Each of these companies was created on sheer enthusiasm, but after she saw the world, she conquered it and took its leading place.
Most financial analysts believe that the "dinosaurs" of the IT world can no longer hold the reins of government. Now at the helm those who are ready to use creativity, create new things and are not afraid of defeats. The desire to implement new, bold ideas appears along with venture capitalists - people who are ready to invest in very risky projects for significant profit in the future.
As a separate type of business, venture capital investments have appeared in the USA. At first, people who were ready to invest in such projects were called adventurers for strong risk. But over time, attitudes toward venture capital investments began to change. Recently, such investors are on a par with ordinary entrepreneurs.
Among the first venture investors it is worth mentioning the legendary people - Tom Perkins, Arthur Rock, Tommy Davis and Eugene Kleiner. Many supporters of this type of investment consider them pioneers. The experience, knowledge and financial investments of these people have become decisive in the formation of the IT industry in the form in which we are accustomed to see it.
Venture fund - what is it?
In simple words, a venture fund is a company that is ready to invest investors' money and own funds in an enterprise or project. To get venture capital investments, this project should be a startup with a well-thought-out strategy.
The activities of this fund are always fraught with serious risks - more than 80% of all projects will never pay for themselves or even bring any income to its owner. But the 20% that start working pay off not only the money invested in them, but also losses on other projects.
Most of the Russian organizations are not even familiar with such activities, because such funds appeared recently in the CIS. On a par with them in the countries of the USA and Europe, especially in its western part, such funds gave a ticket to big business.
Venture capital funds translate as risk. This is a company whose activities are associated with risky young organizations. The account of this organization accumulates funds that are spent on investing in young startups in order to get profit from this. The main criterion in choosing a startup for investments is the availability of possible profit in the short term and its success.
That is why projects that meet the criteria are selected by highly qualified specialists - lawyers, economists and successful businessmen. When choosing, they are guided by the following principles:
- How innovative is the project;
- Is it possible to use the know-how and patented technologies of various levels in the project;
- How much is the return on investment in the short term
- Is it possible in this market segment to become a pioneer and monopolize it.
Like many other types of businesses, the first venture capital fund was created and consolidated in the United States.
The whole world first learned about venture capital funds in the 80s of the last century, when the period of technological progress began at an unprecedented pace. In parallel, constant unique developments were introduced into the field of electronics, which were supposed to improve the efficiency of many organizations. By the year 85, America had more than 650 companies that could provide investment for young startups.
The development of such projects was supported and stimulated by the government of the country; they provided assistance to such companies. By 87, venture capital companies reached their peak, with a combined capital of more than $ 4 billion.
A large part of the business of these funds is investing in securities. But they are also allowed by law to engage in more risky activities. Therefore, along with the purchase of securities, they are engaged in lending to organizations - they buy promissory notes and are engaged in similar initiatives.
Now venture capital funds finance mainly medium-risk companies.
Typically, the amount of investment in one project is 1-5 million dollars.
In the Russian Federation, such funds are poorly developed, when compared with the United States and Europe. Due to the insignificant investment experience, many companies do not agree to risk their capital so much without paper guarantees of a return or, especially, a return with a profit. But in recent years, such funds have gradually begun to appear and develop, giving good prospects for the development of such a business in this country.
Important venture capital funds:
- Addventure 2. A fund that provides both informational and financial assistance to startups. Has a ready-made business model.
- RBK A huge fund that was created back in 2009. He is ready to contribute to those startups that are engaged in progress in scientific and technical fields. This fund is interested in projects that plan to conquer the world market. The capital of this organization, together with its partners, is more than $ 2 billion.
- Russian Vetures. Project investor in Russia. Actively collaborates with many startups, for example, the Molniya news feed or Atlas mobile communications.
- Softline Venture Partners. He begins to sponsor the project even at the time of its development, if he sees its potential. Most often, it draws attention to organizations associated with IT technologies, the field of information security and cloud technologies.
How does this capital fight emptiness
Venture capital funds are a major source of financing in the development of various innovations. According to analysts, over the past two decades, more than $ 10 billion has been invested. There are startups that are ready to sponsor the state, there are those that have personal entrepreneurial sponsors or invest their own funds. And all the rest are financed from venture funds.
It is such funds that occupy a serious void between state and business support on the one hand and private injections of finance on the other. Often, investment is mixed when private and venture capital investments contribute to the same company.
What is the difference between venture investment:
- Serious risks. It is impossible to predict with great confidence how the startup, in which the funds are invested, will develop. Even if everything is calculated and all the parameters are known, it may not work.
- Payback is above average. Those projects that have successfully entered the market pay for themselves and usually bring profit in 3-5 years. The profit is sufficient to recoup several unprofitable projects.
- Personal investor participation. If the invested person wants to make a profit, he will actively participate in the business being developed. Research and consultations are being conducted, the market is being studied, etc.
- Attachments are fully withdrawn after a short time. If the project makes a profit, the investor often quickly withdraws the invested funds with a percentage. This happens as soon as the company achieves stable and large growth.
- Object of investment. This is not always an organization or project. Sometimes they are talented people who have their own projects and need patrons.
How to invest
There are several ways to profitably invest in startups. This is an investment through crowdfunding sites, investor clubs or venture funds. You can create your own fund, but it requires huge capital.
There are a lot of thematic platforms where anyone can become an investor in a project:
- Music group or their album;
- Writing a book;
- Creation of a theme store;
- Realization of an original idea;
- Printing a book or sponsoring its author in an endeavor.
The investor through the crowdfunding platform can count on:
- Return on investment with interest;
- Royalty - a certain percentage of income;
- Share in the organization.
All revenues appear only if the process has been successful and the idea has worked. If the funds were not collected in the right amount or the idea was not profitable, the investor does not receive anything. But the risk in this case is much higher than when investing through other investor methods.
Investor Clubs and Venture Funds
In the first case, the investor instructs the club to find a suitable project for investments, for which it pays the club a small percentage of the commission. The benefit lies in the fact that there is no need to independently calculate the profitability of the project - this is done by the analysts and economists of the club, specializing only in these actions. Often the club invites such investors to co-invest - a great opportunity for a person to enter a good project, even with minimal investment.
The second option is more suitable for experienced investors. Most of the analytical work is carried out by the employees of the fund itself - they evaluate, calculate the level of risks, and distribute startups according to the level of possible profitability. The investor himself receives only income minus expenses and interest for managing his capital.
This investment option has a significant limitation - investments must be large, with a minimum capital it will not work out to participate in a venture fund. The minimum investment amount is 500 thousand US dollars.
There is a second limitation - most funds prefer working with trusted entrepreneurs and investors. Therefore, it will be difficult for a newcomer to enter this market - it will be necessary to conduct many negotiations with the management of the funds before it becomes possible to invest in a worthwhile project.
You can create your own fund and not depend on the management of investing funds. This method involves a several times increased risk - it is difficult to calculate, find suitable analysts and guaranteed profitable startups. But if successful, the investor’s profit will be many times higher than when participating in someone else’s fund.
To create your own unit and start investing, you need not just to study the venture capital market. It is necessary to assemble a team of specialists in this field, rent an office and equipment for work, constantly conduct market analysis and research. It will be necessary not only to legally legalize everything, but also to carry out promotions and start production. To successfully become a fund, more than $ 8 million will be spent. However, the profit can reach cosmic amounts with the right investments in successful projects.
For those who find this a bit too complicated and time-consuming process, it’s easier to follow the path of a patron businessman. You just need to find a suitable project and invest in it. Each businessman has the right to choose the minimum investment size independently, as well as the level of involvement of his ward in the project.
How much can you earn
Successful startups in which people have invested have become famous all over the world. This is the WhatsApp messenger, in which about 250 thousand dollars were invested at the initial stage, and at the moment the company's profit has exceeded 16 billion US dollars. Social networks, especially Twitter, are often referred to as successful projects. They invested 5 million on Twitter, now its amount has stepped over 15 billion dollars.
You may notice that venture capital investments can bring tens and hundreds of times more investment. Despite serious risks, successful projects cover all possible expenses and give huge profits. According to the analytical company, each successful startup attracts up to 25 million, and after successful development, the profit reaches 200-250 million. The profit of each investor can reach 100-1000 percent.
In addition, the investor receives not only an excellent opportunity to earn a large sum, but also become a real founder and sponsor of a new round in the development of any industry, especially in the IT fields.