PE fund strategies
- Stage focus: seed, spin-out, start-up, early/later venture, growth / expansion, small-mid-large buyout, distressed
- Sector focus: established and emerging industries
- Geographic focus
Size: typical VC and buyout + mega and club - Management approach: adding value, monitoring investments
Types of fund:
- Stage of investments
- Sector focus
- Investment Size (range min - max)
- Geographic focus
Same / diversified types of fund
Institutional quality funds versus first-time funds; first time teams
Market timing – vintage years
Number of funds
General partner attributes (track record, consistency, management team, succession, style (hands on/off etc), industry expertise)
Value cycle of a VC-backed company
Start up - Value/cashflow dips
Then value/cashflow rises at each stage:
- Development
- Growth
- IPO/Trade sale
- Acquisitions and disposals/alliances
World Innovation Clusters
San Francisco/Silicon Valley
Boston
Beijing
London
- Entrepreneurial culture and innovation
- Technology universities (science innovation)
- Commercialisation
- Large tech companies (spin-outs and corp venturing)
- Government support
- Venture capital firms and business angels
- Support from accounting and legal advisers
- Transport infrastructure.
Clean tech
Energy efficiency and power conservation
Renewable energy generation
Material sciences and their industrial applications
Environmental services, waste reduction and recycling
Water – treatment and conservation
Transportation
Agriculture and silviculture
Real Estate - PE investing
Includes: office, industrial, residential, retail, hotels & leisure
Value added (improving property value)
- improving quality of property – higher rentals
- upgrading older properties
- redevelopment
Opportunistic ( speculative / turnround)
- distressed purchase, leverage, wait for up-turn in market
- focus on emerging countries
Infrastructure
- Traditionally owned and operated by state and financed by government bodies
- Risks transferred to private sector
- Privatisations
- Public private partnerships and concessions
- long-term lease
- design, build, finance and operate
- build, operate and own
Distressed
- Reorganisations, turnrounds
- Distressed debt - fund established to acquire pools of non-performing loans at large discounts, with the aim being to repackage the debt and later sell it on at a profit.
Private credit
- Trend of pivoting away from mega buyouts to private credit deals
- Higher interest rates and slump of >60% in exits from 2021 peak are curtailing growth in buyouts
- PE firms can achieve 12-13% in senior secured debt with little risk
- But buyouts achieve higher returns
University Spinouts
“A startup company whose formation was dependent on the intellectual property (IP) rights of the university and in which the university holds an equity stake”.
Stakeholders
- Academics
- Institutions
- Investors
Corporate Venturing
Direct Corporate Venturing - Corporate invests directly by buying a minority stake in a smaller, unquoted company
Indirect Corporate Venturing - Corporate invests in fund managed by independent VC
Direct Corporate Venturing benefits
Company receiving investment
- Access to particular skills and knowledge
- Access to established marketing and distribution channels
- Access to corporate’s complementary technologies
Corporate making investment
- May gain competitive advantage by being able to make better use of its own resources
R&D, new ideas or more entrepreneurial culture
