Financing - Equity
Equity financing is money provided by individuals and professionals who invest alongside company management in young, fast-growing companies that have the potential to become economic contributors in the local economy. Equity financing can be an important source of capital for start-up companies.
Outside equity is invested by angel investors, venture capital to investors, or by selling stock in the company through an Initial Public Offering (IPO).
Wisconsin Rural Enterprise Fund, LLC
The Wisconsin Rural Enterprise Fund, LLC is a community-based venture capital fund operating at the Northwest Regional Planning Commission (NWRPC) offices and managed by Wisconsin Business Innovation Corporation. The fund provides pre-venture stage investments of $50,000 to $200,000.
Angel investors are high net worth individuals who make small individual or group investments in promising startups that typically cannot qualify for some or all of the debt financing needed for the startup of the company. Angel capital is usually the first outside investment after the funds of the entrepreneur, family and friends have been injected into the company.
Venture capital and other forms of private equity firms are pools of capital, typically organized as a limited partnership, which invests in companies that represent the opportunity for a high rate of return within five to seven years. Venture capital usually follows the earlier seed and angel investments. The venture capitalist may look at several hundred investment opportunities before investing in only a few selected companies with favorable investment opportunities.
Venture Capital Investments
The average venture capital investment is about $7 to 8 million. The range is usually around $4 million to over $10 million. Raising venture capital usually takes four to six months.
Venture Capitalists (VCs) typically manage other people's money so their primary goal is to secure a highly competitive rate of return for their investors. Their investors are typically large institutional investors, such as state pension funds or endowments.
In order to compensate for the significant risk for most venture capital investments, a high rate of return is expected. Out of ten investments for a VC, most expect three to fail, three or more to neither fail nor be very successful and three companies to be grand slam home runs, providing for a return of the other seven companies invested in.
For further information, email Rick Roeser, or call him at 715-635-2197.