Private Equity to Fuel Healthy Start-Up Ventures
An idea is the genesis of an entrepreneurial venture but the economic viability is the primary driver of its success. Even if commencing the business is easy, taking it to the next level and achieving growth through expansion requires certain amounts to be invested.
A common method for infusion of such funds is procuring third party investment through private placements. With lesser regulatory norms and guidelines, such types of investments in the equity capital of a business are preferred through private equity groups or venture capital firms. Commonly PEGs like Monument Capital Group are known as investors in financial parlance.
Third party investments for business ventures are an industrially viable option through numerous professional funds like Monument Capital Group Holdings. These investments are structured through subscription to equity share capital or preference share capital. In most cases the shares are issued at premiums to account for the valuation of the business. In return for the investments, the partners of the PEGs procure board representation with certain affirmative rights on important operational, management, and financial issues. The first document executed for such transactions include term sheet listing all the agreed terms and conditions. Based on the findings of the due diligence process; definitive agreements, such as the shareholders agreement and share subscription agreement are executed.
When a private equity transaction is successfully consummated, the investors need a pre-determined lock-in period for the promoters. During this period, the promoter group cannot exit their equity holding by sale, mortgage, or pledge of the securities. This is primarily to ensure the promoters continue holding an equity stake to encourage them to deliver the growth listed in the business plan. To know more about private equity and its workings you can visit http://www.huffingtonpost.com/shane-paul-neil/big-data-bigger-breaches-_b_6109928.html. An important criterion for investors is the exit strategy that will be offered for the PEGs to sell their stakes.
