While on the investing side of the venture capital fence at 3i I often came across the equity panic button as we referred to it – managers who were afraid, almost beyond rationality of selling – or giving away as they would have it – equity.
These days I more often come across people who while prepared to sell equity - often still referred to as “giving away equity” - who are more concerned about the relationship with a Venture Capital firm. I wonder if this is due to the publicity surrounding very big private equity deals which are often in the press. For example the speculation around Vodafone as a private equity target.
Last week I interacted with four venture capital firms and private equity houses which reminded me that there are many different flavours of VC house.
- Funding a management buyout we have been dealing with two mainstream venture capital houses – interested in exits in the short to mid term, but quite hands off re management.
- I had a meeting with a privately funded VC, interested in active input to management, but with a more relaxed view on yield and exits as it is their own fund they are investing.
- We met a clearing bank equity division interested in yielding deals, but with a relaxed view on exit as they were investing “their own money”. They are also quite hands off re management but will introduce a non-executive director to most deals.
That’s just in one week – plenty of variety in styles.
So I think that if you have a good proposition you should be able to get some choice of venture capital investor or private equity house. If so the VC should be chosen to match your own aspirations as to exit and relationship style. There might not be quite 57 varieties but most managers ought to be able to find someone to suit. The British Venture Capital Association website has a good overview on how you might narrow down the choice. And of course speaking to an adviser who actually knows some of the folk in the VC houses can short cut the process; but you'd expect me to say that!