venture capital management in SMEs                                      traffic news

  Venture Capital Management in SMEs



 We can not do more times the many problems faced by SMEs, but why not forget them. Is therefore very important that countries keep trying to finance directly to that, finally and after, give them in great economic splendor that characterizes.


It is a long-term investment in minority and temporary way in small and medium-sized businesses with great prospects of profitability or growth. This activity carried out by specialized companies for investment in capital, that add a value to the purely financial.


or that distinguishes risk capital is the way in which provides money and how it seeks payment of the same. Unlike a Bank, these funds involved in ventures in as partners. Thus, companies are not forced to pay fees and interest, but that cede a part of the business, as they would with one partner either.


 As issues that must be solved to foster the development of SMEs, two main stands: the weaknesses of SMEs in business management and access to financing. It is in this context that venture capital emerges as an opportunity for SMEs, since it provides a solution to these two obstacles, and to leverage business growth potential.


To ensure that SMEs benefit from venture capital, it is necessary to overcome some weaknesses which are listed below:

• Resistance and lack of knowledge of the business sector with regard to non-traditional financial instruments.

• Limited development of the stock market.

• Absence of a regulatory framework that encourages the operation of venture capital.venture capital management in SMEs

• Few local venture capital firms.

• Limited experience and specialization of the local firms in venture capital, critical to the success of the process.

Despite the obstacles identified above, there are a number of opportunities which, being exploited, could catalyze the development of risk capital and thus allowing many companies benefit. Some opportunities are:

• Availability of Government funds in support of SMEs.

• Availability of international funds for the promotion of venture capital.

• Possibility to know the experience and lessons learned from developing countries that have been successful in promoting the venture capital, such as Israel or India.



What kind of small or medium-sized enterprise is attracted to an investor of risk? Venture capital and investors are expectant in more developed markets.

We should distinguish between different profiles of an investor of risk:


Angels investors:
This category is located at those who bring the first capital. The amounts are small and often even from relatives and friends, without taking into account in general, that the company will grow… There are also important employers that fulfilled the role of "Angels investors". This is a risky investment because that is usual in this entrepreneurial with his idea, sometimes imprecise, so it is more than one act of faith that a careful analysis of the possibilities of the company or start up. Known as "seed capital" or seed capital, it is many times that unlocks and rise to something big that is not yet seen.


Venture capitalists:
We talk about a type of institutional capital much more structured than the mentioned above. Very familiar with the business in which makes its investments and especially if it invests in SMEs, that is a market without many figures certain officers to analyze. There are capitals of different rank and for different types of SMEs, acting with own capital or technical operators of other investors who want to either clear accounts.

Private Equity Funds:
This is a special class that just started to operate in SMEs in the Argentina in the mid-1990s. It appears just in the phase of consolidation of firms, when they need more working capital, taking participations in different percentage, whether minority or majority.



What demand investors?
An investor of SMEs is seeking $100,000 business onwards. "A"private equity"capitalizes only companies in full production, releases - start up´s" and trafficking in amounts more high, given the operating cost of an investment. The capitalist who looks SMEs looking for business with rates of return that can be obtained in large companies. These segmentations described sometimes are not so strict, but if approximate. Skipping the "Angel" family, the rest of investors seeks projects with great potential for being successful in the shortest possible time, generally between 3 and 5 years.


That marked a successful SMEs for an investor?
It desigualará: A new concept, a market not yet exploited to the maximum, a segment where still may want to be achieve leadership will draw the SMEs of the Equalization with another substitute.venture capital management in SMEs

Defenses: A company with products or services that are defensible of others to maintain the comparative advantage for good amount of time will be substantial to consolidate the market share. If it's a company that anyone could start from scratch, the investment is not appealing.


Management or know-how: linked to the project management has strategic value and the technology applied in the company also. Gaudio and Coria could submit a draft start-up to manufacture racquets or create children of tennis for children and would go on to investors more easily than other fans. Another employer will have that demonstrate why believes that your project is more than other appetizing.

Projected size of the market: an item claiming to know investors almost always is the following: how many dollars will win with this company and when will begin it to receive? -If the company has the possibility to generate good cash flow and demonstrate empirically, investment thrives in a high percentage of odds.


The Book: for an SMEs be analyzed must have a solid Book with a good analysis of the strategy businesswoman and abundant numbers, projective, and historical as well as a comprehensive description of the culture of the Organization and the Character of its members. How is it prepared? The "Book" is the document base that must be submitted to identified potential investors. Demonstrations It is assumed that a book includes an appropriate valuation DCF, Proyectivas simulations of Cash Flow and historical performance analysis. Actually many people interested in looking for Venture Capital made a Brief with a multitude of data and jumbled pictures of difficult to read for a trained investor. Many has trouble understanding must order this key to a specialist instrument making as many failures occur because the data do not meet the requirements expected of them and the management plans a deplorable vision before third parties.



Considerations for financing small enterprises


To improve their chances of success, you must first generate a bit of effort to eliminate the most common mistakes new entrepreneurs make. According to experts, most beginners should invest a lot of time researching the potential of their business and the market as well as other aspects mentioned below.venture capital management in SMEs




Failures in the measurements of income


Lack of knowledge of the market: competition is not known, other stakeholders (suppliers, substitutes, etc.), obvious threat of new entrants, it is estimated that a new market will be interesting and attract customers by what is new, when in reality, consumers prefer in general what is known. Generally entrepreneurs know much of his product, but investigations by competition, substitutes, etc., etc. is a common weakness in the business plans


Little commitment to entrepreneurs

Excessive valuations: traditional valuation systems that do not apply to emerging companies, are used are under-valued the idea of the business, under-valued the stage of doing reality, trade capacity-building in relation to technical capacity is under-valued. Low risk for the founders: calling for wage conditions equal to the employees, low income entrepreneurs and sales or usefulness ratio, expected that investors will make contribution to start the company, not evidenced a spirit of sharing the risk with investors, expected a salary higher than that achieved in the market.



Misuse of resources

Excessive expenditure on promotion: promotion without concrete results measurement campaigns are set, assume that increased promotional spending will lead to an increase in income, did not cover market research to determine the best use of resources.


Little sophistication in the management of the expenses or costs: are assumed total costs high, and related companies of greatest need, is not carried out a thorough examination of efficient management of costs, are assumed costs of large and efficient enterprises. Of this there is something...Him it would add are often underestimated many expenses.



Valuations without sense or justification

Lack of sensitivity analysis: are not performed estimated increases or decrease in prices or numbers of clients and their impact on the equilibrium point nor on the usefulness of the company.


Lack of livelihood of the assumptions, are assumed unsupported strategic or actual income and expenditure. Sometimes cases are taken very fortunate as certain. It is very important to analyse the assumptions are the foundation of the projections.venture capital management in SMEs