How Does the Professional Venture Capital Industry Work?
AVCAL’s 47 Venture Capital Managers had funds under management or committed of approximately $A6 billion at June 2001. Some Mangers had multiple funds. Venture capital firms typically source most of their funding from large investment institutions such as superannuation funds and banks. These institutions invest in a venture capital fund for a period of up to ten years. To compensate for the long-term commitment and lack of security and liquidity, investment institutions expect to receive very high returns on their investment. Therefore, venture capitalists invest in companies with high growth potential or in companies which have the ability to quickly repay a high level of debt – as in the case of a leveraged management buyout. Venture capitalists typically exit the investment through the company listing on the stock exchange, selling to a trade buyer or through a management buyout. Although the venture capitalist may receive some return through dividends, their primary return on inve
