How to Find Reliable Venture Capital Partners through a Placement Agent
Posted on Thursday, July 14th, 2011 at 1:13 am.
One of the decisions a company must consider while fund raising from potential venture capital partners is to look for a good standing placement agent. This is in order for a company not to spend too much of its own time seeking for seed capital, mezzanine capital, or growth capital funding for startups or various business expansions. A company can be better served using a placement agent that has a strong network of seed capital, venture capital and growth capital connections, allowing the company to focus more on their core competencies and other management issues rather than spending so much time seeking for investment partners.
Placement agent acts as an intermediary in the world of fundraising. Agents are sometimes individuals but more often a firm who assist entrepreneurs, private equity groups, or institutional investors who are willing and capable of investing. Their main function is to help connect those who are seeking to raise venture capital, and other various investors who are interested in investing capital into companies who are looking to raise funds.
It is a very challenging task for a placement agent to connect entrepreneurs with venture capital partners. Companies located along Sand Hill Road in Silicon Valley who can raise venture capital, growth equity, or mezzanine debt with reasonable ease will obviously not consider using an agent. But for companies located outside Silicon Valley in areas with less developed venture capital markets, an agent is a very reasonable option.
As companies search for venture capital partners or equity investors, it is important to seek out the partners who will offer favorable terms. Placement agents generally have legal backgrounds with representation from top Silicon Valley law firms and provide valuable legal counseling. Agents work to seek investors who have strong value propositions along with their financial investment through their experiences, expertise, and network of contacts.
GrowConnect offers a range of private placement services to entrepreneurs as well as private equity groups. With a vast network of equity investors and high caliber legal representation GrowConnect will work to raise capital for your offering.
Knowing the Importance of Growth Capital in a Business Cycle
Posted on Wednesday, April 27th, 2011 at 10:40 pm.
Most often a high-growth and mature companies look for funding to increase their profit, to expand, to restructure operations through organic approach, to enter new markets, or to finance a significant acquisition without a change of control of the business. These companies seek for growth capital to finance a major transformation of their business.
Growth capital is a form of private equity investment in a late-staged level of a business life. Financial institutions tend to provide this capital to businesses who are able to generate revenues and operating profits, and to those companies who have already reached a stable point where they are capable of exploring opportunities or expansion but unable to generate sufficient funds. Financial firms who provide growth capital support businesses that have market leadership potentials.
Growth capital is also known as growth equity and expansion capital. It exists at the intersection of private equity and venture capital and it is provided by a variety of sources. Companies who seek for growth capital are likely to be more mature than venture capital funded companies because they have already established their revenues that are already proven in markets or industries. Because of insufficient funds these companies generally can find alternative conduits to obtain capital for growth and expansion.
Growth capital is often structured as either Common equity – a type of capital used to directly absorb losses; or Preferred equity – a measure of equity which only takes into account the preferred stockholders, and disregards the common stockholders. While other investors also use various Hybrid securities that include a contractual return such as interest in payments, in addition to an ownership interest of the company. Hybrid securities are group of securities combining debt and equity, the elements of the two broader groups of securities. It behaves more like fixed interest securities while others behave more like the underlying shares into which they convert.
There are numbers of dedicated growth equity firms around the United States that can provide the financial needs of your business development. The amount of capital that can be produced would range anywhere from $2 million to $100 million, depending on the firm and whether they would take a majority or minority investment in your company. Since this type of financial service involves a great amount of capital, therefore it is best to partner with financial firm who have time-tested and battle-hardened fund raising techniques, who do not just provide you financially but coaches you as well, and most importantly, who delivers service with the highest sense of integrity.
Hiring a Placement Agent to Market Mezzanine Capital and Growth Equity Investors
Posted on Friday, March 18th, 2011 at 12:15 am.
A placement agent is a financial firm who act as an intermediary in the world of fundraising. Sometimes it is an individual but more often a firm, who assists entrepreneurs, private companies, or institutional investors who are willing and capable of investing a private equity fund. Basically, they match cash-hungry funds with cash-rich investors. They are often structured as groups within huge investment banking firms such as Credit Suisse Private Fund Group and UBS Investment Bank, or as separate boutique investment banks such as MVision Private Equity Advisers and Campbell Lutyens.
In the context of private equity, a placement agent serves several functions for a company such as raise mezzanine capital or venture capital, as well as raise investor commitments to new private equity funds. The market is very competitive especially with the advancement of media and technology, and the need of a placement agent is now certainly arising in this new economic environment. They are crucial to fundraising for emerging markets of private equity funds.
A company usually hires a placement agent in order not to spend too much of its own time seeking for mezzanine capital or growth equity investors. Sometimes the lender also commissions an agent so that the fund partners can aim attention at management issues rather than focusing on how to raise venture capital. Mounir Guen, chief executive of MVision says, “A placement agent is a necessity.” Why? “Because if the job is done well it brings a level of sophistication and experience to the fundraising process.” This is because financial institutions have become more crucial and sophisticated in evaluating potential investments.
In the past, these agents were hired to introduce private equity funds to the investors or to what they termed as limited partners (LP), and simply congratulated after a job well done. But today, they are highly valued advisors who understand and know their limited partners and the market’s appetite for different approaches. They also advise and assist fund managers and help develop marketing strategies. Their critical responsibility is constantly trying to satisfy their limited partners and value their judgment in order to establish long term and deep relationship.
Placement agents can bring a myriad of relationships with growth equity investors, mezzanine capital firms, or venture capitalists. They can cherry-pick investors that are likely to come into a particular fund, increasing efficiency and minimizing risk in the fundraising project, according to James Coleman who joined Deloitte LLP after UBS Investment Bank, two of the globally known financial services firms. They can also advise some existing owners of private equity assets on secondary market sales of their interests.
Placement agents are mostly compensated through fees ranging from 1 percent to 3 percent by the companies or individuals who raise capitals. Sometimes their fees and terms of engagement would extremely vary depending on the length of time to execute the fund and based on the amount of money raised.