Very basic VC question
So, I'm getting the opportnity to talk to the MD of a small VC firm soon regarding a pre-mba associate position. I'm very interested in VC, but admit its mostly curiousity and I don't know a whole lot about it. My main question is, do VC firms use leverage in there funding of companies? I'm talking about seed VC.
I am not a college student, so i don't have access to vaul (for free at least). An recomendations for resources to use to familiarize myself with the industry and type of questions I may be asked?
While I can't say for sure, I can't imagine leverage would make sense for the kinds of deals VCs make.
When you're investing in companies that lose 99% of their value most of the time, and only rarely do you make 1000% on your investment, you'd end up defaulting on your debt a lot I'd think. The returns are just too unpredictable.
I don't have experience in VC, but even in growth equity (clearly later stage investments than VC), many investments are not meaningfully leveraged given the nascent stage of the companies and the absence of positive earnings/cash flows, for the reasons captk mentioned above.
is that it's not your money going out, but when it's coming in you can grab some.
VC's will usually raise money for a fund with certain specifications (target company stage/industry, fund size goal, etc). Money is raised from LPs (limited partners) ranging from HNWIs to institutions such as retirement funds. The VC firm then charges a management fee, as well as a percentage of profits.
VC firms don't need to take out loans because there are enough people/institutions who will pay them for the chance to invest (via management fees). Why would you take out a 10 million dollar loan at 7% interest when CALPERS will pay you 2% to take 10 million from them?
Cum expedita dolor dolorem est quia suscipit. Voluptatem dolor pariatur est dolorum saepe deserunt voluptatem voluptatem. At velit explicabo debitis animi occaecati sed sit. Quisquam earum itaque quasi delectus et sunt velit.
Corrupti aut dolorem repudiandae harum sint nesciunt rem. Expedita sit pariatur nulla est adipisci sit nostrum. Commodi quaerat tempore accusamus mollitia quisquam. Tempore facere soluta sit nobis. Et est ratione ut qui reiciendis nam et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...