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Private Equity and Venture Capital Sourcing


  • Submitted on 17 March 2014

    Created on March 17, 2014
     

    The following is an excerpt from Frequently Asked Questions about Small Business Finance

    Dollars bills and question markWhat is the lending picture for ventures owned by women, veteran, minorities, and immigrants?

    Women-owned businesses (just like their male counterparts) largely depend on personal finances; but women-and minority-owned firms are more likely to use credit cards for startups and expansion. Women are 30 percent more likely than males to start businesses without seeking financing, and only half as likely to obtain business loans from banks. Hispanic- and African-American owned firms are more likely than other business owners to rely on owner equity at startup. Veteran-owned businesses’ use of credit for startup and expansion was similar to other businesses. For example 11 percent of veterans used credit cards and 8 percent used bank loans for expansions, while the figures were 13 percent and 9 percent, respectively, for all firms.

    The sources of startup capital used by immigrant businesses do not differ substantially from those used by non-immigrant firms. However, their heavier-than-average reliance on credit cards negatively affects a business by displacing a personal relationship with a bank, which is often the source of less costly financing that is tailored to a business’s needs.

  • Submitted on 05 February 2014

    Created on February 5, 2014
     

    This post originally appeared on SBA.

    SBIC InvestingSBA’s loan-guaranty programs are among the best-known ways we fulfill our mission of helping small businesses start, grow, and succeed.  In FY13, for example, together with our lending partners we facilitated over $29 billion dollars in loans to new and existing small businesses.

    But for some small businesses, equity financing is a better option – and SBA has great tools to help those businesses too.  One of my priorities as Regional Administrator is spreading the word that our Small Business Investment Company (SBIC) Program provides additional capital to private fund managers for investment in high-potential small businesses.

    Greater capital access for our fastest-growing businesses

    Costco, Amgen, Apple, FedEx, Staples, Intel – these are just a few of the well-known companies supported by SBIC investments in the past.  Five decades since its creation, the SBIC program continues to be among our most innovative examples of public-private partnership, successfully channeling billions of dollars in growth capital to small businesses across the United States.

  • Submitted on 22 January 2014

    Created on January 22, 2014
     

    CrowdFundingOn October 23, 2013 the Securities and Exchange Commission (SEC) voted unanimously to propose rules under the JOBS Act to permit companies to offer and sell securities through crowdfunding.

    Crowdfunding describes an evolving method of raising capital that has been used outside of the securities arena to raise funds through the Internet for a variety of projects ranging from innovative product ideas to artistic endeavors like movies or music.  Title III of the JOBS Act created an exemption under the securities laws so that this type of funding method can be easily used to offer and sell securities as well.  The JOBS Act also established the foundation for a regulatory structure for this funding method. 

    SEC Chair Mary Jo White noted that the intent of the JOBS Act is to make it easier for startups and small businesses to raise capital from a wide range of potential investors and provide additional investment opportunities for investors. 

  • Submitted on 23 January 2013

    Created on January 23, 2013
     

    Angel InvestorsMinority-owned businesses are the fastest growing business sector in the Nation, in terms of gross receipts and paid employees.[1] Yet, access to capital remains the biggest obstacle limiting their establishment, expansion and growth. While traditional funding remains the most sought after source of capital, alternative funding sources, such as angel investors, have proven successful for minority entrepreneurs.

    Minorities represent on average less than 7% of all entrepreneurs seeking funding from angel investors. However, they succeed in acquiring angel funding as often as their non-minority counterparts. From January 2009 to June 2012, 17% of all entrepreneurs seeking angel investor funding succeeded. The yield rate for minority entrepreneurs during that same period was 16.1%, a negligible difference. The yield rate is the percentage of investment opportunities that are brought to the attention of investors that result in an investment.

  • Submitted on 03 October 2012

    Created on October 3, 2012
     

    David Hinson, National Director

    I attended the 42nd Annual Meeting of the National Association of Investment Companies (NAIC) and came away with extraordinary news and a more optimistic outlook on the growth and expansion of the minority business community.  Today, NAIC released a quantitatively focused report that underscores the strong performance of minority and women-owned private equity firms.  These firms create new jobs and expand the U.S. economy by providing much needed capital to the nation’s minority- and women-owned businesses. 

    The report, referred to by its short name, Recognizing the Results, is formally titled The Financial Returns of NAIC Firms: Minority and Diverse Private Equity Managers and Funds Focused on the U.S. Emerging Domestic Markets.  Compiled by the highly respected accounting firm KPMG, Recognizing the Results demonstrates that NAIC members—27 minority and diverse private equity firms focused on the U.S. emerging domestic markets – have outperformed the overall private equity industry for the past 13 years.  These results capture a representative sample of the larger sector of diverse and minority private equity firms. 

  • Submitted on 20 October 2011

    The U.S. Small Business Administration’s Small Business Investment Company (SBIC) program provided a record $2.59 billion in fiscal year 2011 to small businesses, a 63 percent increase over last year’s $1.59 billion.

    “Over the past two years, we’ve made SBIC work better than ever before,” said SBA Administrator Karen Mills.  “We cut licensing time in half, which has strengthened efficiency and made it possible to get capital into the hands of small businesses more quickly. When an SBIC invests in a company, it can scale up and create jobs.”

  • Submitted on 13 May 2011

    “Startup America also represents a historic partnership with business leaders, investors, universities, foundations, and non-profits, and we're urging others to join them in this effort. For entrepreneurs speak to what's best about America, and in their drive and innovative spirit -- in their willingness to take a risk on a bold idea -- we can see the future. We can see how America will compete and win in the 21st century global economy.” President Obama

  • Submitted on 06 August 2010

    Small Business Investment Corporations (SBICs) are privately-owned and managed investment firms that provide venture capital and start-up financing to small businesses. To be eligible for SBIC financing, your business must meet certain SBA size requirements for a small business.

    Generally, the SBIC Program defines a company as "small" when its net worth is $18.0 million or less and its average after tax net income for the prior two years does not exceed $6.0 million. When you contact an SBIC, you'll need to present a professional business plan that addresses your company's operations, management, financial condition and funding requirements.

  • Submitted on 02 August 2010

    InvestorEquity capital generally is composed of funds that are raised by a business in exchange for an ownership interest in the company. This interest can be in the form of ownership of common or preferred stock or instruments that convert into stock.

    In addition to taking an ownership interest in your company, equity investors may also participate as a member of the company’s board of directors and take an active role in managing your company. However, in comparison to debt financing, or loans, which must be repaid over time, equity financing does not have to be repaid.
    While equity investing can come from family and friends, it’s often raised from high net-worth individuals or from venture capital or private equity firms. Investors are looking for early stage companies that can’t yet obtain traditional financing; a return on their investment of at least 30-40 percent and a clear strategy to realize their investment within 3-7 years.

Did you know...

Between 2002 and 2007, minority-owned firms outpaced the growth of non-minority firms in gross receipts, employment, and number of firms. Minority firms are an engine of job creation.
Graph for MBE Growth

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