Debtors in the world of capital business generally believe that Business Angel, Private Equity Firm, Private Investor, Business Lender and Venture Capital are the same thing. In principle, even though these entities are similar because they invest in other companies, we need to understand what differentiates them.
All these entities operate with Private Capital, which consists of the money paid for the takeover of shares, regardless of who, from the stock packages of companies not listed on the stock exchange. In the case of listed companies, we can only talk about public capital.
Private Capital – This term is used to describe those private entities that acquire shares of other companies.
Business Angel – are generally successful business people who invest personal funds in business potential.
Private Equity Firm – are companies using equity or collective capital received from other investors to take over private companies in order to better manage and sell them for profit.
Private Investor – a person who places their capital in a project or a business, with the intention of making a profit from the initial capital investment.
Business Lenders – Entity that grants small amounts of money for current activities or for procurement of equipment and new technologies. The amounts are provided after a review of financial data and are generally offered in the short term.
Venture Capital – are companies that invest funds entrusted by other legal or physical persons.
The fact that a Business Angel operates with personal money and Venture Capital with money from other sources is also reflected in the financing capacity: a Business Angel will invest less than a Venture Capital.
The main features of the most important entities are:
A Business Angel investor may be willing to invest in the early stages of a company already launched or in the start-up of a new business idea with amounts ranging from: 10,000 to 100,000, rarely going up to a million. They can contribute to business management or make useful business connections. Experience leads them to invest in familiar areas where they have expertise.
They are rarely interested in investing in the early stages of a business, with the exception of high-tech businesses made by leading and successful companies in this field. They invest more than 1 million. As a rule, he calls for an important place on the board of directors. They have a huge portfolio of contacts.
With all these differences between the two types of private equity investors, one can imagine a natural and beneficial correlation with starting a business angel and continuing it, if it proves to be successful, with the participation of a Venture Capital.
“Private equity investors” can secure a start-up financing. However, this process is not easy because, when you have the chance of funding, you often find that the risk of your business or the donor’s criteria and strategies make it impossible for you to access funds. The unrealistic expectations of the parties often destroy the win-win principle. That is why InvestMarket shows its interest in providing as much information as possible about investor types and their interests before recruiting an investor.
Investors and crisis
There is no doubt that the current financial and economic crisis started in 2008, as well as the projected “Covid-19” crisis, has affected and massively affected the dynamics of this under the industry. The increasing number of restructurings, bankruptcies, layoffs, trespasses, state takeovers of large companies (see USA) also affected this industry. After the first and second wave of the crisis a prudent, almost scared and timid slowdown of the economy arose. Some industries and markets have not recovered at the moment, and here I specifically refer to the real estate market, for investors the crisis has led to a decrease in the volume of investments by over 89%. It is true that in the last year there is a rebound in the tendencies before the crisis but not far in their amplitude. The reason is the extremely cautious approach of the market today. Today we find that heavier investors allocate funds of over one million euros and that, in principle, they are limited to amounts in the order of tens or hundreds of thousands of euros. The orientation of these players in today’s post-crisis market is to markets and stable areas where the risk factor is controllable. This adaptation to the market is a logical effect of the desire to have a stable return on investment.
In 2020, the situation of the market investments is as follows:
The bulk of the investments was made in the field of assistive services medical equipment and medical equipment, accounting for (16%) of total private investment. The second place was software (13%), retail (12%), biotechnology (11%), industry, energy (8%) and media (7%). Return rates were variable, representing 70% mergers and acquisitions, 26% bankruptcies and IPO (private company transformation) 4%. At the same time, the shrinkage of the investment market, which in this particular case has a particularly dynamic field such as pandemic medical research and production, makes the number of real investment opportunities high and, consequently, the market is dynamic with much higher volumes.