sunnuntai 27. joulukuuta 2009

About the Venture Capital Terminology

As you might know, I researched on Venture Capital and Private Equity in my Masters Thesis. Since then I haven't been able to get over of three concepts that are commonly used in venture capital business.

Venture Capital

First of all, according to stories, the history of the venture capital concept relates back to 13rd century Europe where brave men loaded their cargos and sailed the unknown seas in order to find a shorter way to India. They were financed by some wealthy individuals who bought a share of the ships in exchange to the possible future profits. They diversified their portfolio and reduced the risk by investing in several ships. Perhaps the most famous venture capitalist of this kind was Christopher Colombus, the founder of America, who was funded by the Royal family.

Venture capital term was invented by Benno Schidt who was a partner of investment company J.H. Whitney & Co. Venture capital term relates to word adventure and it describes the high-risk nature of venture capital investments. I quess it is a kind of adventure to invest in venture capital. So, be the real adventurer of the 21st Century and invest in adventure capital!

Business Angel

People who work in Venture Capital are often called Business Angels. I really have been wondering who on Earth invented term Business Angel? I'm sure he didn't lack any self-esteem. What do you do? I'm a Business Angel. Are there any other profession on Earth that relates itself to angels? In my mind angels are immortal, they make no mistakes and they are the posture of all good. I guess this is what Business Angels do in business.

According to Wikipedia "Business Angel is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital."

As the definition says, there are groups of angel networks around the World. Well, this leads to a question that where and who is then Business God? There should be a Business God somewhere. In my imagination He or She is the Lord of all businessmen and businesswomen in the World and the Master of all Business Angels. Think about it, what a position! To become a Business God, that would be a true goal of a life!

Smart Money

It would be too modest for Business Angels to invest just money. Money is a commodity, it's nothing special and everyone has it. That is why Business Angels invented the whole new concept, Smart Money, to differentiate their money from bulk money. According to a definition Smart Money describes experienced investors and traders, who tend to spot trends and find investment opportunities before everyone else.

On the other hand Business Angels not just invest monetary capital, they also bring knowhow to the company they invest in. Well I have tried to find the wisdom of my euros, but still I haven't found any. So I have come to a conclusion that:

Money is not smart. Money is stupid. People who invest money may be smart.

With a terminology like this, how can you resist the temptation of venture capital...

2 kommenttia:

  1. Are you now writing in English?!? Oh, and the article was again full of quality. Seems like I'm studying on my free time in the Luoma University :)

  2. Joo, laitan jatkossa varmaan joitain tekstejä myös Lontoon murteella aiheesta riippuen. Ehkä se enteilee tulevaa...

    Heh, saat kunnian olla laatuyliopiston ensimmäinen opetuslapsi :)


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