El-Watan

Promoting Democracy in Algeria

The Risk Capital

Venture capital is about temporarily investing some capital in companies that have no financial or property nature and need the participation of these funds to increase their value. Once matured investment and achieved the goal of the company, the venture capitalist is removed obtaining their capital plus some dividends. However, it should be noted that the concept of “venture capital” differs somewhat between the Hispanic world and the Anglo world. As you can imagine, this concept refers to entities that perform activities related to venture capital, while for whites it makes the difference between the organizations whose activities are based in developing projects for companies that are in their early stages, called “risk capital” or “venture capital”, and entities that invest in companies previously consolidated.

This capital is called “equity” or “private equity” rather than venture capital. The objective we seek the majority of venture capitalists is owned businesses to participate in dynamic economic sectors with a growth rate higher than average growth. Thus, once the company has achieved this growth the investor may withdraw from the business using certain specific strategies to regulate their output, such as public offering of its shares in the company, selling its share to an investor, somehow , strategic, or sale of shares to the company itself, which is a buyback.

Within the world of venture capital investments, there are several recognized and different kinds of operations. We refer here to invest in already established businesses, or “private equity.” One of the most important is the purchase of a company from it or its assets. This purchase is done by some of the managers working on it with the help of a private equity firm, in English this system is known as the “Management Buy Out” or MBO. Another way out is interesting in buying a company whose control obtained by combining the support of outside directors and managers with those of inmates. This is what is known as the “Management Buy In Management Buy-Out” or BIMBO. Finally, we mention an exit strategy called “Management Buy-In” or MBI, which is buying a company whose control is achieved through a management staff outside the company but sustained and supported by a capital institution investment.

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