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How Much Does Venture Capital Drive the U.S. Economy?

How Much Does Venture Capital Drive the U.S. Economy? | Crowd Funding, Micro-funding, New Approach for Investors - Alternatives to Wall Street | Scoop.it
Two scholars measure the economic impact of VC-funded companies.

Over the past 30 years, venture capital has become a dominant force in the financing of innovative American companies. From Google to Intel to FedEx, companies supported by venture capital have profoundly changed the U.S. economy. Despite the young age of the venture capital industry, a fifth of current public U.S. companies received venture capital financing.

Venture capital (VC) is a high-touch form of financing that is used primarily by young, innovative, and highly risky companies. Venture capitalists provide not only financing but also mentorship, strategic guidance, network access, and other support. These investments are highly speculative — most of the companies that receive VC funding will fail, even as some become runaway successes. Three out of the five largest companies in the world received most of their early external financing from VC. 


Via Marc Kneepkens
Richard Platt's insight:

Venture capital (VC) is a high-touch form of financing that is used primarily by young, innovative, and highly risky companies. Venture capitalists provide not only financing but also mentorship, strategic guidance, network access, and other support. These investments are highly speculative — most of the companies that receive VC funding will fail, even as some become runaway successes. 3 out of the 5 largest companies in the world received most of their early external financing from VC.  Clearly, Apple, Google, and Microsoft are among the most innovative and most important companies in a generation. But how important are these and other VC-backed companies to the U.S. economy? How do they compare to industrial behemoths such as General Motors or massive financial institutions such as Bank of America in terms of job creation and overall economic impact? The researchers set out to quantify the long-term impact of VC on the U.S. economy. Started by classifying companies as either VC-backed or non–VC-backed, considering only public companies that are traded on major U.S. stock exchanges. While most successful VC investments end with the company being acquired, reliable information is currently available only on those companies that become publicly listed. Thus, our results likely underestimate the impact of VC on the economy.

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Marc Kneepkens's curator insight, October 26, 2015 1:04 PM

#VentureCapital is huge in the US, it has propelled #Tech to the forefront and helped the biggest companies in the world to get to that point.

June Rumiko Klein's curator insight, October 27, 2015 1:31 PM

Interesting statistics!  Definitely part of the overall mystic and fabric of Silicon Valley and high tech in general.  Very creative and exciting soup of entrepreneurship, investment and high risk/rewards.

malek's curator insight, October 29, 2015 6:45 AM

VC investment employ 38% of working force

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Scrutiny of Security Start-Ups May Signal Shift in Venture Funding

Scrutiny of Security Start-Ups May Signal Shift in Venture Funding | Crowd Funding, Micro-funding, New Approach for Investors - Alternatives to Wall Street | Scoop.it

Cybersecurity companies have had an easy time raising money in Silicon Valley over the last few years. But investors are starting to ask about profit and sustainability.

SAN FRANCISCO — A funny thing happened to Orion Hindawi while he was raising $120 million for his cybersecurity start-up last month: Investors asked him about profits.

A year ago, Mr. Hindawi raised $90 million, followed by an additional $52 million this year from the Silicon Valley venture firm Andreessen Horowitz. Investors were willing to place a $900 million valuation on his company, called Tanium, without so much as a glance at revenue or profit margin.

This time, not so. As he made the rounds with investors like Institutional Venture Partners and T. Rowe Price, Mr. Hindawi said, he was asked to show sales and profit margins. “A lot of the funders we spoke with are starting to get really scared,” he said. “This time the questions were, ‘Is this a sustainable business? Do you guys actually make money?’ ”


Via Marc Kneepkens
Richard Platt's insight:

Cybersecurity companies have had an easy time raising money in Silicon Valley over the last few years. But investors are starting to ask about profit and sustainability.    A funny thing happened to Orion Hindawi while he was raising $120 million for his cybersecurity start-up last month: Investors asked him about profits.  A year ago, Mr. Hindawi raised $90 million, followed by an additional $52 million this year from the Silicon Valley venture firm Andreessen Horowitz. Investors were willing to place a $900 million valuation on his company, called Tanium, without so much as a glance at revenue or profit margin.   This time, not so. As he made the rounds with investors like Institutional Venture Partners and T. Rowe Price, Mr. Hindawi said, he was asked to show sales and profit margins. “A lot of the funders we spoke with are starting to get really scared,” he said. “This time the questions were, ‘Is this a sustainable business? Do you guys actually make money?’ ”

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Marc Kneepkens's curator insight, September 3, 2015 10:43 AM

#VC firms are slowing down and start asking questions about revenues. Money flow is getting tighter.

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How Venture Capitalists Make Investment Choices

How Venture Capitalists Make Investment Choices | Crowd Funding, Micro-funding, New Approach for Investors - Alternatives to Wall Street | Scoop.it
In order to increase your odds for receiving funding, here are some criteria considered by venture capitalists.

It's easy to dislike angel and venture capitalist investors. For entrepreneurs looking to raise capital for their start-up businesses, these early-stage investors can be awfully hard to find, and when you do find them, it's even tougher to get investment dollars out of them.

But, think again: angels and venture capitalists (VCs) are taking on serious risk. New ventures frequently have little or no sales; the founders may have only the faintest real-life management experience, and the business plan may be based on nothing more than a concept or a simple prototype. There are good reasons why VCs are tight with their investment dollars.

To read the full article, click on the title.

Get your Free Business Plan Template here: http://bit.ly/1aKy7km


Via Marc Kneepkens
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In order to increase your odds for receiving funding, here are some criteria considered by venture capitalists

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Marc Kneepkens's curator insight, January 25, 2014 7:31 PM

Excellent article explaining VC funding and what it takes to be considered.

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How To Be A VC Without Any Capital

How To Be A VC Without Any Capital | Crowd Funding, Micro-funding, New Approach for Investors - Alternatives to Wall Street | Scoop.it

One of the most frequent questions I get as a VC is how to become a VC.

Newly minted MBAs and startup veterans alike want to get into the investing game in increasingly large numbers. Unfortunately, there are so few VC jobs available in any given year it makes the prospect unlikely for most.

If you want to be a VC, my advice is to just get started; you can do the job of a VC without a dollar to your name. Seriously, you don’t need a specific degree, a list of specific credentials on your CV, or scads of family money to do the job of a venture capitalist. I’d wager that almost anyone reading this post has the raw cognitive capabilities to do the work. Read more: click image or title.



Create your own capital raising instruments for your own VC fund, with Financial Architect®

More here: http://www.business-funding-insider.com/RaisingCapital.html



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How to Be A Venture Capitalist, Minus the Capital: The job of a VC can be broken down into four distinct tasks:   (1) Sourcing Deals: Finding entrepreneurs at the earliest stages is a critical skill. It helps to have the imprimatur of a top-flight VC firm behind you, but fund affiliation isn’t a requirement.   - One way to source deals is to find meetups for emerging technologies and identify the most interesting and industrious attendees. Tim O’Reilly calls these people “Alpha geeks.” Chris Dixon has said that what hackers do in their garages for fun turns out to be what everyone does a decade later. If you can find groups of these people, you’re well on your way to your first investment. (2) Diligence: Another key aspect of the VC job is doing due diligence. This is the process where you look into the background of the founders to see if they’re credible and honest.  It also means doing a deep dive in the industry. Calling potential customers. Getting feedback from key opinion leaders. Creating a thesis for an emerging market. Working out financial models. Predicting how the market might develop.  It might be awkward to call around on individuals, but you can easily trawl for market information and craft all of this data into a compelling presentation.

(3) Negotiation: Once you’re sold on the founders and have found enough evidence to suggest the business will succeed, the next step is hammering out finances. How much money does this founder want/need? What kind of valuation would they accept? You’re not going to finalize things at this stage, but roughing out a basic set of terms is pretty straightforward.   "Money will chase opportunity."  Note: It’s absolutely critical that you remain 100 percent honest during this entire process. If you represent to startups that you work for a VC firm, or suggest any relationship that isn’t recognized by the VC, you’ll instantly be blackballed. Likewise, don’t make claims about being on the team when talking to the VCs. Clearly explain what you’re doing to all parties. When in doubt, disclose. Your reputation is in the balance.


(4) Financing: Now you might be thinking this is where my crazy notion of being an independent VC will fall apart. Unless you can bankroll the company independently, you’ll need to find some monied investors who are willing to take a risk, right?  This sounds hard, but money will chase opportunity. If you can find compelling companies, explain why the market is attractive, why this team is equipped to dominate that market and present a framework for a deal, there will be plenty of angels or firms willing to cut a check or, at least, take a meeting.  You’ll want to be on the radar of these folks before asking them to look at any of  your “deals,” but after a couple of high-quality intros, they’ll be eager to hear from you.


Much more to read and understand in the article before you attempt this being a VC without the Capital, but I can professionally tell you that it is a worthwhile read.

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Marc Kneepkens's curator insight, September 21, 2015 10:42 AM

Everyone can be a #VC. However, it's a tough job, not only do you need to know how to find the right #startups to work with, you also need to know how to attract the #investment #capital. Take a look at 'Financial Architect'. There is a free eBook download with a lot of information. http://bit.ly/1Lr9RrI


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As More Tech Start-Ups Stay Private, So Does the Money - NY Times

As More Tech Start-Ups Stay Private, So Does the Money - NY Times | Crowd Funding, Micro-funding, New Approach for Investors - Alternatives to Wall Street | Scoop.it

By Farhad Manjoo.


Fledgling companies are increasingly delaying initial public offerings of stock, which can keep the risks — and rewards — limited to venture capitalists and hedge funds.

Not long ago, if you were a young, brash technologist with a world-conquering start-up idea, there was a good chance you spent much of your waking life working toward a single business milestone: taking your company public.Though luminaries of the tech industry have always expressed skepticism and even hostility toward the finance industry, tech’s dirty secret was that it looked to Wall Street and the ritual of a public offering for affirmation — not to mention wealth.But something strange has happened in the last couple of years: The initial public offering of stock has become déclassé. For start-up entrepreneurs and their employees across Silicon Valley, an initial public offering is no longer a main goal. Instead, many founders talk about going public as a necessary evil to be postponed as long as possible because it comes with more problems than benefits. Read more, click image or title.


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Silicon Valley’s sudden distaste for the I.P.O. — rooted in part in Wall Street’s skepticism of new tech stocks — may be the single most important psychological shift underlying the current tech boom. Staying private affords start-up executives the luxury of not worrying what outsiders think and helps them avoid the quarterly earnings treadmill.  -  It also means Wall Street is doing what it failed to do in the last tech boom: using traditional metrics like growth and profitability to price companies. Investors have been tough on Twitter, for example, because its user growth has slowed. They have been tough on Box, the cloud-storage company that went public last year, because it remains unprofitable. And the e-commerce company Zulily, which went public last year, was likewise punished when it cut its guidance for future sales.


Scott Kupor, the managing partner at the venture capital firm Andreessen Horowitz, and his colleagues said in a recent report that despite all the attention start-ups have received in recent years, tech stocks are not seeing unusually high valuations. In fact, their share of the overall market has remained stable for 14 years, and far off the peak of the late 1990s.  -  That unwillingness to cut much slack to young tech companies limits risk for regular investors. If the bubble pops, the unwashed masses, if that’s what we are, aren’t as likely to get washed out.

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Intel Capital Invests $65M In Startups Ranging From Interactive Video To Wireless Electricity | TechCrunch

Intel Capital Invests $65M In Startups Ranging From Interactive Video To Wireless Electricity | TechCrunch | Crowd Funding, Micro-funding, New Approach for Investors - Alternatives to Wall Street | Scoop.it
Intel Capital has announced investments in 16 companies, totaling $65 million. The investments spanned cloud services, datacenter technologies, mobile and..

Intel Capital has announced investments in 16 companies, totaling $65 million. The investments spanned cloud services, data-center technologies, mobile and consumer-related services.

The investments are as follows:

CloudFX of Singapore is a cloud strategy consulting company that helps companies re-architect IT infrastructures, operations and helps institute DevOps style practices.Cloudian of Japan and the United States, is an object storage platform that is compatible with Amazon Web Services, Citrix Cloud Platform, Apache CloudStack, OpenStack and other cloud services.CSDN is a Chinese company that provides a community website and services platform for IT professionals in China. According to Intel Capital, it has 27 million registered users and 500,000 enterprise partner members. The company owns several Chinese IT communities such as CMDN, a mobile developer community and IT recruiting website Pongo.DotProduct provides software for real-time capturing and processing of 3-D data on Android tablets. Use cases include documenting crime scenes to imaging movies sets for gaming and entertainment applications.Wayz Japan is a service to store, manage, access, share and organize files anywhere on any device.Interlude is an Israeli platform provider to create interactive videos that allows viewers to determine what happens next in the viewing experience.  Its authoring platform.-Treehouse, allows video creators to map, build and publish Interlude videos on Web, mobile and social platforms. Pretty cool.Lintes Technologies, is a Taiwan-based company that makes the Thunderbolt peripherals that provide high-speed data transfer. According to the company website, Thunderbolt was developed by Intel, and brought to market with technical collaboration from Apple.Perpetuuiti TechnoSoft Services of Singapore and India, offers advanced data recovery technologies that help businesses in complex  IT environments, orchestrated across virtual and physical computing resources in different data centers.Prism Skylabs, which today received $15 million in funding, helps companies use footage from existing security cameras to provide retailers and other businesses with “web-style analytics.”Reduxio Systems, of Israel, boasts it offers infinite data recoverability through real-time primary storage deduplication and protection technologies.Rocketick, also of Israel provides software simulation acceleration for chip verification, helping reduce time-to-market of new designs.Savaari Car Rentals is an online car rental company that offers car rentals across 60 cities in India to both retail and corporate customers.SBA Materials develops “nano-porous dielectrics” that for example, can help improve the performance of advanced chips used in mobile devices while reducing their power consumption.SkySQL, of Finland, announced it has raised $20 million to deepen its support for MariaDB, the fast growing open-source relational database and the emerging database of choice for Wikipedia.WiTricity specializes in wireless electricity. The company was founded in 2007 with clients in consumer electronics, automotive, medical devices and defense.

Intel Capital is an active venture group. According to CB Insights, it is the third most active investor in security technology companies. The analyst group reports that it has recorded the highest number of security exits among investors since the start of 2012. Among Intel Capital’s recent security exits include FireEye and Palo Alto Networks.

For links to each of those companies, click on the title to see the original article on TechCrunch.

 

 


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About time the motheship spent some $$

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Marc Kneepkens's curator insight, October 23, 2013 12:28 PM

More and more VC capital is coming from cash rich companies like Intel.