Английский язык. Практический курс для решения бизнес-задач

Пусенкова Нина

Winners and losers

Venture capitalists hope to be able to sell their stock, warrants, options, convertibles, or other forms of equity in 3 to 7 years, at or after an exit event; this is referred to as harvesting. Venture capitalists know that not all their investments will pay off. The failure rate of investments can be high; anywhere from 20% to 90% of the enterprises funded fail to return the invested capital. In case a venture fails, then the entire funding by the venture capitalist is written off.

Many venture capitalists try to mitigate the risk of failure through diversification. They invest in fledgling companies in different industries and different countries so that the risk across their portfolio is minimized. Others concentrate their investments in the industry that they are familiar with. In either case, they usually work on the assumption that for every ten investments they make, two will be failures, two will be successful, and six will be marginally successful. They expect that the two successes will pay for the time given to, and risk exposure of the other eight. In good times, the funds that do succeed may offer returns of 300 to 1000% to investors.

History

General Georges Doroit is considered to be the father of venture capital industry. In 1946 he founded American Research and Development (ARD) Corporation, whose biggest success was Digital Equipment Corporation. When Digital Equipment went public in 1968 it provided ARD with 101% annualized ROI. ARD’s US$70,000 investment in Digital Corporation in 1959 had a market value of US$37mn in 1968. The first venture-backed startup is generally considered to be Fairchild Semiconductors, funded in 1959 by Venrock Associates. Before World War II, venture capital investments were primarily the domain of wealthy individuals and families. One of the first steps toward a professionally-managed venture capital industry was the passage of the Small Business Investment Act of 1958. The 1958 Act authorized the U.S. Small Business Administration to license private

«Small Business Investment Companies» to provide financing and management assistance to small entrepreneurial businesses in the United States. Passage of the Act addressed concerns raised in a Federal Reserve Board report to Congress that concluded that a major gap existed in the capital markets for long-term funding for growth-oriented small businesses. The goal of the SBIC program was, and still is, to stimulate the U.S. economy in general, and small businesses in particular, by facilitating the flow of capital to pioneering small concerns.

Venture capital is a phenomenon most closely associated with the United States and technologically innovative ventures. Due to structural restrictions imposed on American banks in the 1930s there was no private merchant banking industry in the United States, a situation that was quite unique in developed nations.

As of 2006 some of the most well known VC Firms are:

– Kleiner, Perkins, Caufield and Byers.

– Sequoia Capital.

– Sigma Partners.

The dotcom boom

Due almost entirely to the dotcom boom, the late 1990s were a boom time for the globally-renowned VC firms on Sand Hill Road in San Francisco. IPOs were taking truly irrational leaps, and access to «friends and family» shares was becoming a major determiner of who would benefit from any such IPO; the ordinary investor rarely got a chance to invest at the strike price in this period.

The NASDAQ crash and technology slump that started in March 2000, and the resulting catastrophic losses on overvalued, non-performing startrups, shook VC funds deeply. By 2003, many VCs were focused on writing off companies they funded just a few years earlier, and many funds were «under water»; that is, their portfolio companies were worth less than when invested in. Venture capital investors sought to reduce the large commitments they have made to venture capital funds. As of mid-2003, the conventional wisdom was that the venture capital industry would shrink to about half its present capacity in the following few years. However, Pricewaterhouse Coopers’ MoneyTree Survey shows total venture capital investments holding steady at 2003 levels through Q2 2005. The renaissance of an Internet-driven business (thanks to deals such as eBay’s purchase of Skype, the News Corporation’s purchase of MySpace, and the very successful Google IPO) has helped to revive the VC environment.

Source: Wikipedia

Essential Vocabulary

1.venture capital (VC) –

венчурный (рисковый) капитал

venture capitalist – венчурный капиталист

2. capital market – рынок капитала

3. bank loan – банковский заем

4. collateral (collat) n – обеспечение

5. initial public offering (IPO) – первоначальное публичное предложение акций

6. entrepreneur-in-residence (EIR) – «домашний» предприниматель

7. due diligence – процесс должной проверки

8. Chief Technology Officer (CTO) – главный технический директор

9. fixed-lifetime fund – фонд с фиксированным сроком действия

10. pioneer n – первопроходец

pioneer v – прокладывать путь, вести

11. ascendance n – власть, доминирующее положение

12. preferred stock – привилегированные акции

13. convertible (convertibles) debt instruments (bonds) – конвертируемые долговые инструменты (облигации)

14.common stock – обыкновенные акции

15. buyout n – выкуп

buy out v – выкупать

16. rule of thumb – эмпирическое правило, практический метод

17. warrant (WT) n – варрант

18. harvest n – урожай, уборка урожая

harvesting n – уборка урожая

harvest v – собирать урожай

19. write off n – списание

write off v – списывать

20. mitigation n – смягчение, уменьшение

mitigate v – смягчать, уменьшать

21. fledgling company – только что созданная компания

22. annualizing n – пересчет в годовое исчисление

annualize v – пересчитывать на годовой основе

annualized a – пересчитанный на годовой основе

23. passage n – зд. прохождение, принятие (закона)

pass v – принимать (закон)