Week 8

Question 1

PE fund strategies

Answer 1

• Stage focus: seed, spin-out, start-up, early/later venture, growth / expansion, small-mid-large buyout, distressed
• Sector focus: established and emerging industries
• Geographic focus
  Size: typical VC and buyout + mega and club
• Management approach: adding value, monitoring investments

Types of fund:
- Stage of investments
- Sector focus
- Investment Size (range min - max)
- Geographic focus
Same / diversified types of fund
Institutional quality funds versus first-time funds; first time teams
Market timing – vintage years
Number of funds
General partner attributes (track record, consistency, management team, succession, style (hands on/off etc), industry expertise)

Question 2

Value cycle of a VC-backed company

Answer 2

Start up - Value/cashflow dips

Then value/cashflow rises at each stage:
- Development
- Growth
- IPO/Trade sale
- Acquisitions and disposals/alliances

Question 3

World Innovation Clusters

Answer 3

San Francisco/Silicon Valley
Boston
Beijing
London

• Entrepreneurial culture and innovation
• Technology universities (science innovation)
• Commercialisation
• Large tech companies (spin-outs and corp venturing)
• Government support
• Venture capital firms and business angels
• Support from accounting and legal advisers
• Transport infrastructure.

Question 4

Clean tech

Answer 4

Energy efficiency and power conservation
Renewable energy generation
Material sciences and their industrial applications
Environmental services, waste reduction and recycling
Water – treatment and conservation
Transportation
Agriculture and silviculture

Question 5

Real Estate - PE investing

Answer 5

Includes: office, industrial, residential, retail, hotels & leisure

Value added (improving property value)
- improving quality of property – higher rentals
- upgrading older properties
- redevelopment

Opportunistic ( speculative / turnround)
- distressed purchase, leverage, wait for up-turn in market
- focus on emerging countries

Question 6

Infrastructure

Answer 6

• Traditionally owned and operated by state and financed by government bodies
• Risks transferred to private sector
• Privatisations
• Public private partnerships and concessions
  • long-term lease
  • design, build, finance and operate
  • build, operate and own

Question 7

Distressed

Answer 7

• Reorganisations, turnrounds
• Distressed debt - fund established to acquire pools of non-performing loans at large discounts, with the aim being to repackage the debt and later sell it on at a profit.

Question 8

Private credit

Answer 8

• Trend of pivoting away from mega buyouts to private credit deals
• Higher interest rates and slump of >60% in exits from 2021 peak are curtailing growth in buyouts
• PE firms can achieve 12-13% in senior secured debt with little risk
• But buyouts achieve higher returns

Question 9

University Spinouts

Answer 9

“A startup company whose formation was dependent on the intellectual property (IP) rights of the university and in which the university holds an equity stake”.

Stakeholders
- Academics
- Institutions
- Investors

Question 10

Corporate Venturing

Answer 10

Direct Corporate Venturing - Corporate invests directly by buying a minority stake in a smaller, unquoted company

Indirect Corporate Venturing - Corporate invests in fund managed by independent VC

Question 11

Direct Corporate Venturing benefits

Answer 11

Company receiving investment
- Access to particular skills and knowledge
- Access to established marketing and distribution channels
- Access to corporate’s complementary technologies

Corporate making investment
- May gain competitive advantage by being able to make better use of its own resources
R&D, new ideas or more entrepreneurial culture