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Chapter Twenty

Chapter Twenty. Venture Capital Firms, Finance Companies, and Financial Conglomerates. Venture Capital Firms. These firms provide funds for start-up companies Often become very involved with firm management and provide expertise. Venture Capital Investments. Venture Capital Disbursements.

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Chapter Twenty

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  1. Chapter Twenty Venture Capital Firms, Finance Companies, and Financial Conglomerates

  2. Venture Capital Firms • These firms provide funds for start-up companies • Often become very involved with firm management and provide expertise

  3. Venture Capital Investments

  4. Venture Capital Disbursements

  5. Top 20 Venture Capital Firms

  6. Venture Capital Firm Organization • Most are limited partnerships • Source of capital includes wealthy individuals, pension funds, and corporations • Investors must be willing to wait years before withdrawing money

  7. Life of Venture Capital Deal • Fundraising • Venture firm solicits commitments, usually less than 100 per deal • Investment phase • Seed investing • Early stage investing • Later stage investing • Exit • Usually IPO as merger National Venture Capital Association (click on Industry Research) http://www.nvca.com

  8. Purpose of Finance Companies • They are money market intermediaries • Borrow in large amounts (commercial paper) and invest in small amounts (loans)

  9. Risk in Finance Companies • Default Risk • Liquidity Risk

  10. Types of Finance Companies • Business Finance Companies • Factoring • Leasing • Floor Plan Loans • Consumer Finance Companies • Sales Finance Companies • Captive Finance Company

  11. Finance Company Loans Figure 20-4: Types of Loans Made by Finance Companies, 2001

  12. Different Types of Business Loans Figure 20-5: Types of Business Loans Made by Finance Companies (end of 2001)

  13. Finance Company Business Loans Outstanding Figure 20-6: Finance Company Business Loans, 1991–2001

  14. Commercial Paper Placed by Finance Companies Figure 20-8: Commercial Paper Placed by Finance Companies, 1989–2001

  15. Finance Company Balance Sheet

  16. Growth in Finance Companies, 1979-1998 Figure 20-9: Growth of Finance Company Assets, 1980–2001 Current statistics on finance companies http://www.federalreserve.gov/releases/g20

  17. Financial Conglomeration • Economies of Scale • Economies of Slope • Many conglomerate mergers are being reversed

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