Venture Funding vs. M&A

Venture investment means the acquisition of equity, authorized capital of new or growing companies, while the acquired share is less than the controlling stake.

The Relevance of the Development of Venture Capital

Providing long-term funds to young companies at an early stage of development in exchange for a stake in these companies. Venture capital provides a financial element of the innovation infrastructure, bringing together the carriers of capital and carriers of technology, and it is he who solves the problem of financial insufficiency in the sector of start-up innovative projects. Thanks to venture capital, such companies as Intel, Microsoft, Google, Yandex, Abbyy, A4Vision, and others were created.

The relevance of the development of venture capital is due to the economic role of venture capital in providing financial resources to innovative companies, improving the quality of their management through the use of investor experience in management, and in facilitating the receipt of financing by an innovative company from other external sources. In addition, the institution of venture entrepreneurship supports the development of innovative industries, which helps to increase the country's international competitiveness, creates additional jobs, and develops the real sector of the economy.

A significant link in any infrastructure of venture financing is innovative companies – start-ups. Besides, one of the common mistakes in the implementation of project management methods is that the actual transition to the project management methodology does not occur and the project is implemented in accordance with the principles and concepts of operational management. It is important to note that there are many differences between bank operations and project management activities, including investment projects.

Venture Funding vs. M&A: What to Choose?

Venture funding and M&A structural transformation and reorientation of the economy towards the creation of innovations are important for achieving the operational goals of government policy. The implementation of large-scale state projects requires a competent set of tasks, the solution of which ensures the implementation of a single economic policy and provides incentives for the development of all sectors of the Belarusian economy.

Combining two rather different areas – M&A and venture capital transactions (including investing and exits) and fund structuring (including formation, negotiation of limited partnership memorandums or fund rules, regulatory issues), we consider them as a single branch of business and We are proud of our diverse experience and close cooperation. The main difference between venture funding and M&A is as follow:

  • From an M&A perspective, private equity (PE) firms differ from their more famous cousins, venture capital (VC) funds, in terms of the types of investment each fund pursues.
  • PE firms typically invest in profitable companies, while VC funds invest in start-ups.

Analysts estimate that corporate venture investments, which in the United States are made mainly at later stages of a company's life cycle, generally have a positive effect. The valuation of a company in this round of financing is usually higher than the valuation of a similar company at the same stage, but without a corporate investor. Thus, in order to achieve a synergy effect as a result of an M&A transaction, it is necessary to consider in detail each aspect of the transaction; at each stage of preparation, ensure that all actions are carried out in accordance with the strategy of the acquiring company. As a general rule, the success of major M&A deals will depend on the industry in which they are or are about to enter.

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