Venture capital is a type of private equity capital typically provided by outside investors for financing new or growing businesses. Venture capital investments are generally high-risk investments but offer the potential for above-average returns and/or a percentage of ownership of the company. A venture capitalist (VC) is a person who makes such investments. The initial, start-up money is referred to as “seed money” and entails the greatest risk. If the project gets off the ground it may require additional financing at additional “rounds” before the company is finally brought to the market and the venture capitalist can enjoy handsome rewards.

As the Fed decides to ease interest rates, middle market acquisition financing structures will benefit in a number of ways. The underlying values of middle market companies will increase leading to a higher enterprise value and lower loan to value ratios for existing portfolio companies of acquisition financing lenders.

The role of acquisition financing is infrequently elevated above a functional transactional one. When a business needs financing to acquire, they go to the market and source acquisition financing to supplement their equity investment to close the deal. Despite existing in many different forms, acquisition financing is rarely explained in terms of the value it brings to the acquirer.

Acquisition financing underwriting usually focuses on business and financial issues that underpin the stability of cash flow. Providers of acquisition financing usually validate the durability of a company’s competitive advantage and the depth of its resource base. Environmental issues are usually not a major part of the analysis in today’s service and technology-based economy.

Venture Capital

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