FAQ's
Q1. What are Private Equity and VC Funding?
Ans. Private Equity is an investment asset class describing private investments in privately held (as opposed to publicly traded) companies. As an asset class, private equity investments are very illiquid; investment commitments have typical durations of 3 - 5 years.
A private equity firm typically has one or more funds that it manages. Each fund will have a stated investment strategy that describes aspects of investments it prefers. These preferences may include:
•Industries
•Geography
•Stage of deals, e.g., pre-revenue or post-revenue, growing or mature
•Size of total investment
Each fund has a General Partner (GP). The general partner is responsible for:
•Selecting the best investments or portfolio companies for a fund
•Working with the management of these portfolio companies to increase the value of the initial investment
•Developing a strategy for the fund to exit the investment within a given time frame
Private Equity falls into two broad groups: venture capital and other private equity.
Venture Capital (also known as VC or Venture) is provided as seed funding to early-stage, high-potential, growth companies and more often after the seed funding round as growth funding round (also referred as series A round), in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. To put it simply, an investment firm will give money to a growing company. The growing company will then use this money to advertise, do research, build infrastructure, develop products etc. The investment firm is called a venture capital firm, and the money that it gives is called venture capital. The venture capital firm makes money by owning a stake in the firm it invests in. The firms that receive venture capital funds usually have a novel technology or business model. Venture capital investments are generally made in cash (through banking channels) in exchange for shares in the invested company. It is typical for venture capital investors to identify and back the companies in high technology industries such as biotechnology and IT (Information Technology).
Venture capital typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms.
Venture capital firms typically comprise small teams with technology backgrounds (scientists, researchers) or those with business training or deep industry experience.
A core skill within VC is the ability to identify novel technologies that have the potential to generate high commercial returns at an early stage. By definition, VCs also take a role in managing entrepreneurial companies at an early stage, thus adding skills as well as capital (thereby differentiating VC from a buy-out private equity which typically invest in companies with proven revenue), and thereby potentially realizing much higher rates of returns. Inherent in realizing abnormally high rates of returns is the risk of losing all of one's investment in a given startup company. As a consequence, most venture capital investments are done in a pool format where several investors combine their investments into one large fund that invests in many different startup companies. By investing in the pool format the investors are spreading out their risk to many different investments versus taking the chance of putting all of their money in one start up firm.
A venture capitalist (also known as a VC) is a person or investment firm that makes venture investments, and these venture capitalists are expected to bring managerial and technical expertise as well as capital to their investments. A venture capital fund refers to a pooled investment vehicle (often an LP or LLC) that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans.
In addition to angel investing and other seed funding options, Venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company's ownership (and consequently value).
Private Equity, on the other hand, defined as growth fund or buy-out money. In Private Equity investment, normally, the investors invest in growing companies, with already established business models, for meeting the funding requirements of expansion, diversification and or for buy-outs. The procedural aspects of both types of investment are all same excepting for the risk factors involved and comfort available for the investors in the case of Private Equity investment.
Q2. How Melborne Finance help the Investees / Entrepreneurs reach suitable Investors?
Ans. We, at Melborne Finance, review and evaluate the proposals received from different investees or entrepreneurs, depending upon the economic viability, unique selling proposition of the products or services, scalability of the business in due course, expected returns on investment over a period of three to five years, we post the proposals on our web board. We will also arrange to send Teasers of the proposals to a couple of investors or PE/VC funders. Once they evince interest on any proposals, immediately, upon signing up of an NCNDA, we will forward the detailed business plan to investors. It will be followed by a one-to-one meeting between the investee and investors for a direct presentation and negotiation. The deal will be concluded upon arriving at a mutual agreement on terms and conditions of the funding between the parties.
Q3. How secured is Entrepreneurs information and data?
Ans. Your idea is protected as Melborne Finance will only display a snapshot or summary of your business idea to our business investor community. Since, only a Teaser or an Information Memorandum, without disclosing the identity of company or the promoters, will be posted on our web-board, more information is not available on the web-board. From our experience, serious, credible Investors’, who are serious about investing, will only need a brief snapshot or executive summary of your idea or investment proposal before deciding on whether or not they wish to contact you to discuss your plan further.
Further, the information posted on the web board is accessible only by the registered investors. Lastly, the detailed business plan will be provided to only those investors who have evinced interest in the proposals and agree to sign up an NCNDA. The chances of information or data reaching some third party are ruled out. Your information is kept private and never shared with third parties and any information stored in our system is protected electronically as well as through procedural safeguards. Also, only registered Accredited Investors who meet Self Accredited guidelines can view your investment summary.
Q4. Confidentiality
Ans. As explained to Q.No (3), the information or data pertaining to any of the investees, will not be allowed to any third party without taking sufficient and practical safe guards. To investors, the information is given in the form of Teaser or detailed business plan that too upon signing up of NCNDA. As such, Melborne Finance endeavors to take all precautions before any information or data is passed on to any investors. Therefore, the investees can be rest assured that secrecy of their information or data is very well taken care of.
Q5. What is procedure?
Ans.
• Access Login
• Send the Executive Summary/Teaser/Information Memorandum along with the prescribed fee of Rs.552/- or foreign currency of $25 or equivalent amount.
• You will be informed of our decision to go further in due course.
• Up on receipt of our intention to go ahead with your proposal, send detailed Business Plan along with required fee of Rs.11030/- or foreign currency of $500 or equivalent amount.
• Evaluation of Business Plan and discussion.
• Your proposal will be uploaded on our web-board or else the decision will be made known.
• A teaser of your proposal will be sent to the concerned Investors and followed up.
• Once the Investor expresses interest, the detailed business plan will be sent to the investors upon signing up of an NCNDA or otherwise. Once the investor desires to meet the investee and have one-to-one meeting, we will arrange for the same in a most convenient place and time suitable to both the parties. Consequent upon arriving at agreement on terms and conditions, necessary steps will be taken to arrange for signing up of Term Sheet, etc.
• We will help you throughout the funding process.
Q6. Will you help in preparing a good business plan?
Ans. Yes
Q7. Will you charge fee for your services?
Ans. Yes, we charge for preparing business plan if we are asked to prepare the same and for appraising / evaluating the proposals before posting on the web board.
Q8. Is there any upfront fees?
Ans. There are no upfront fees except for evaluating your proposal before posting on the web board.
Q9. Will you charge for hosting proposal on your web-board?
Ans. No, the proposals found viable after evaluation will be hosted free on web-board.
Q10. Are there any “success fees” payable?
Ans. Yes, upon successful completion of funding process, the investee-company / firm has to pay a success fee, which will be agreed up on at the time of accepting the proposal. However, this fee will be reasonable, affordable and very well within the market practices.
Q11. Will there be any other services available from you?
Ans. Yes, strategic management and financial advisory services are available. For details please see under “Services” on Home Page.
Q12. I have other questions, who do I contact?
Ans. Contact us by email: info@melbornefinance.com
