Who is Marcus Luer – CEO?
Marcus Luer, CEO and Co-founder of Hubber.gg (Thailand), is one of the most prominent sports entrepreneur. He is the founder of Total Sports Asia (TSA) and Co-founder of GLORY Sports International (GSI).
Marcus is a renowned industry expert and speaker. He has been featured on CNBC, BBC News, Bloomberg Asia, regularly presents at major global sports conferences, and has contributed to many international newspapers and industry magazines articles.
What is Venture Capital Funding ?
As per Wikipedia, Venture capital (VC) is a type of private equity. Its a form of financing that is provided by firms or funds to small, early-stage, emerging startups that are deemed to have high growth potential, or which have demonstrated high growth (in terms of number of employees, annual revenue, or both). Venture capital firms or funds invest in these early-stage companies in exchange for equity–an ownership stake–in the companies they invest in. Venture capitalists take on the risk of financing risky startups in the hopes that some of the firms they support will become successful in future and in this process VC firm will get multiple times return on their investment.
Venture funding is not meant to be long term funding. The central idea in such funding is to insert investment in an organization’s balance sheet and also infrastructure till a predetermined size and market credibility is reached so that is can be sold to a larger corporation and public-equity markets can get into the action and generate liquidity. Essentially, a venture Capitalist would purchase a stake in an entrepreneurial idea and nurture it for a short duration ending in an exit with the aid of an investment banker. Putting things simply, the big challenge here remains to progressively earn a superior return on investments in what are inherently risky business ventures.
Logic behind the VC Deal
There are many variations of the basic deal structure in VC fundraising styles, but irrespective of specifics, the logic of the deal doesn’t change: to provide investors in the venture capital fund both sufficient downside protection and aso favorable position for additional investment if the company proves to be a winner.
Venture Capital Industry Works like this – it has four main players: entrepreneurs needing funds; investors wanting high returns; investment bankers needing companies to sell; and finally the venture capitalists who generate money for themselves by making a market for the other three players
VC firms also need protection from investment risks which is gained in the form of an effort to co-invest with other VC firms. Usually the organizational structure in such as co-investing effort is a lead investor and follower investors. It is actually very rare to see a sole VC firm funding an individual company completely. It is considered common practice however for VC firms to have around three or two groups involved in all stages of financing. These act as media for diversification for VC firms leading the VC firms to invest in more deals for the same amount of cash. What they also do is reduce workloads of the VC partners by dividing risk assessment tasks amongst themselves during the due diligence period and also helps in managing the deal overall.
Another positive effect of having several VC firms collaborating on funding for a particular company, is that the credibility of the funding itself along with the company goes up. It has often been suggested by market observers that really top notch funds always will be a follower of top tier firms.
Expectation of higher returns in the VC deal
In return for financing one to two years of a company’s start-up, venture capitalists expect a ten times return of capital over five years. Combined with the preferred position, this is very high-cost capital: a loan with a 58% annual compound interest rate that cannot be prepaid. But that rate is necessary to deliver average fund returns above 20%. Funds are structured to guarantee partners a comfortable income while they work to generate those returns.
Great examples for such VC deals would be the ones done with Flipkart as well as Ola Cabs, where the ROI was tremendous for the VC firms involved. Since these firms were pioneers of sorts, and played the market right whist meeting the current demand without any shortage in supply, they have emerged as market leaders in the country with other VC firms queuing up to fund them and be a part of the huge bottom line.
The Final Word on Venture Capital Funding
Venture Capitalism is a new breed of industry that is gaining momentum all throughout the world. The motto of this industry is to heavily invest in initial growth phases of companies and reap high profits in the short run as the company grows rapidly. This unique business model has the potential to create employment on a global scale by supporting the employers themselves leading to an all-around win-win situation. VC raising funds in Hubber to get a heavy growth and graph will go up.