Game and win-win situation: a VC in the eyes of PE English text: What VC Can Learn From Private Equity Editor's Note: This article comes from overseas famous blog AVC, the Chinese version of the world will be compiled Fenduo Zhuhai. Author himself as a VC point of view, based on their previous PE in Europe and there is exchange of experience between VC and PE can learn from each place into the depth of thought and discussion, and we, as entrepreneurs, I believe also can learn from the things that we need ... I am the managing partner Eric some time in Europe and a PE (private equity) companies spent a week in the VC (venture capital) and in my PE he would excel in our respective areas of investment were a week-depth exchanges. After the exchange really touched me, it has been conducting post-ruminant thoughtfully pondered ever since. I also another good during the non-controlling equity investments (ie minority investments - Minority Investment) of PE in our portfolio to a company's board of directors had a pleasant exchange. Through careful observation period and listen to his ideas and investment banking experience, to be fair, I think he is still learned a lot.
In fact, venture capital and private equity investments in the investment is there are many fundamental differences of principle. Although both of them are non-listed companies to invest in anticipation of the company's shares owned by the company's future can at acquisition / sale or listing of a better price; at the same time, both of them are also likely to be in The Board of Directors of the investment in place in order to regulate their investments. However, the same point they will stop it. I've seen some of the VC investment before the company's success in a certain period of time the transition to PE investment company, so it obviously implies, in principle investment, VC and PE should still have some skills may be interchangeable. But even so, I still agree with the above mentioned they are still fundamental differences exist in the investment principles. Here are some key points of comparison: PE belongs to the holding investments; and VC minority equity investments. PE not tolerate any failure of a single investment; while VC is often cast a wide net, and many investors expected the presence of failure (Editor's note: According to 'From 0-1' of Peter Thiel's argument, according to a power law, as long as Their portfolio can have an exponentially soaring level (such as Facebook), they can earn the disk full bowl full). PE to generate leverage by financial engineering (that is, how to use a minimum equity capital to produce the greatest benefits), and VC by chasing disruptive innovation and the opportunities arising from technology-driven to generate leverage. So what we have learned VC from PE anything? Here is seriously thinking about this a couple of weeks I crystallization: 1, many of the companies we invest in VC often is the only following the lead of the company founder, worse still, some VC did not even obtain a seat in any of the investment company's board of directors . VC companies often will we \u0026 rdquo; added \u0026 ldquo; mention the word, but often it's just a gimmick to finalize it before the investment, once finalized, VC brings added value to the company more often than you imagine To pitiful much. PE have to practice a lot and there is not the same, PE all day want to do is how to deal value.
Have a well established fact is that this is PE's own business too. If your company screwed up, then, to blame blame them himself. Therefore, the degree of care and concern for PE portfolio companies is very high. PE is often excellent companies they invest outstanding \u0026 ldquo; \u0026 ldquo ;, trader can even help companies to improve the rules of the game to change the industry's height. Since after and Eric in Europe after a week of talks, I hit determination to come back naruto cosplay costumes for sale after that experience applied to more of our portfolio companies which, because it is too strong. Perhaps as VC after you heard this immediately back down and said: \u0026 ldquo; because we have not invested in the holding company, so even if we wanted to do more, we did cosplay costumes for sale not have the ability to change the company's management-level decision-making . And we do not want to fall into the details of how the operation of the investment company were to go. \u0026 Rdquo; this I agree. But you really have to not invest in a company full control, in order to generate sufficient meaningful influence over its management team, strategy, and operations. I believe that if you really are worthy of the trust the company's management team, and if you can appear immediately around them when they need you (of course, if they think you do not need when you should immediately come up) then, if you have enough homework to do on the investment company, team, market, and the opportunities have a full understanding of it, so you can pass your wisdom to have a material impact on the company. I was very happy to spend time and effort to put these applications to the companies we invest in, and I also recommend that all other VC should be done this way. 2, under normal circumstances PE companies will not accept joint investment. They like to their own one pair of companies to invest, and then be responsible for the company up and running. Joint investment in small-scale and well-functioning, often the effect is very powerful. But in most cases the number of joint investment company investment involved is very large and dysfunctional. So everyone rushes to these investment companies will jointly invest to be indiscreet What is more, it will pass the buck. For the company's CEO, it often does not make sense to "vocaloid cosplay " suffer from these things above: What should listen to whom? If different investors on the company's decisions have different opinions on how to handle? How to deal with this whole sorry mess?
So I'm very envious of a PE investment company for the investment company has the right to speak completely. Let everyone know who is the boss of this company, who has the final right to speak, which is how to promote the business forward development is very useful. And we've done is a joint VC investment, so we tend to invest on the board because of the company's mutual wrangling and painful pinch frame, if coupled with a weak and inexperienced CEO, then this is even worse a . 3, PE investment company the right to decide when to sell portfolio companies. By comparison, the case of the VC, if the founders will have a say in the words of the founder to decide when to sell, or else determined by the Board. In either case, the individual can decide when a VC portfolio companies will be the case of the sale are rare. We can look at an earlier example Facebook, as Facebook board member Marc Andreessen once claimed, then the investment firm Accel Facebook ever wanted to about one billion US dollars to the price sold to Yahoo, but was in fact founder Mark Zuckerber not willing to (and during Marc Andreessen urged him not to sell), so in the end it did not surname ya Facebook. I do not know what the story is from the official history or unofficial (which is very common in the business world, things tend to be after the companies successfully make some changes occurred in the past and then advertised to match their best interests). Nevertheless, sometimes VC does not decide when to sell the company to some extent, in fact, it is also a good thing. Otherwise, the world today would not be born so many levels of listed companies a unicorn.
Of course, this approach is also tight if and when the investment company's future success really get the time to be effective the exception. And often a combination of the companies we invest in most companies can only be regarded as good only, and not to the extent outstanding, so in this case if the company can sell to other predators, in order that everyone get a good return, this is the right choice. Unfortunately this VC is unlikely, because almost no one can have a separate VC company invested by the full right to speak. 4, PE investment companies are very good at mining industry information to identify business problems and provide solutions and to get rid of these problems. This is rare in the VC community. One reason is that, if we do like this, then, the company's CEO would think we sabotage their companies. Second it is that we actually normal VC investment company is no reason the PE so much like human resources come to help companies do these things, we tend more to provide some consulting services. Once the investment company transformed into a big business, VC often will have served its purpose, since VC advisory services provided before the transformation is very valuable, but after the transformation, the company invested in has been very mature, These advisory services are no longer needed a. By comparison, PE, throughout the company's growth process, we can see their shadows. I eventually realized that I need to invest in the company to devote more attention to the growth stage, because we often return journey from the future of the company soared exponentially, so if we had the value of the company will be able to improve 2- 3 times (which are often pursued by PE), then our future is likely to get 50-150 times better returns ranging from the level of the enterprise may be the unicorn, this difference is very great. So even though I have not seen an own analysis, consulting and in-depth study of the army to assist our portfolio are most likely to become a unicorn winning business, but I will do everything we can to try to make more investment to help these companies, and to bring more of these enterprises \u0026 ldquo; value \u0026 rdquo ;.
Overall, the harvest of deep thinking these weeks is a long time for PE, PE accountability for the investment company is very clear, and there is a clear-cut decision and say in, and a lot of time to invest in companies with very heavy sense of responsibility and belonging. And these are what we need to learn from VC. Although we often impossible for all the companies in which we invest are treated equally and be equate into scattered, because those of us who tend to VC while investing 8-10 or more companies. However, I think we can still learn a lot from PE body, we can ask them to take some of the wisdom and tactics over and that our portfolio companies and corporate head-founder bring more value! Translation / World Council Zhuhai Fenduo; micro-channel public number: TechGoGoGo /techgogogo