See below for a selection of FAQs that you may find helpful.
What is a Venture Capital Fund?
Venture Capital Funds are autonomous investment vehicles, without legal personality, belonging to holders of Participation Units. Venture Capital Funds are managed by a management company, such as STAG, who invest, for a limited period, in companies offering a high growth potential.
Venture Capital Fund Management Companies are not responsible, under any circumstances, for the debts of the unit holders of the funds under management, or of the funds, or of the entities that undertake the marketing function or make the deposits (for example, banks).
Who supervises and regulates Venture Capital Funds in Portugal?
Venture Capital Funds in Portugal are regulated and supervised by the Portuguese Securities Market Commission (CMVM).
What is the role of a Venture Capital Management Company?
The main role of a Venture Capital Management Company (SCR), such as STAG, relates to the investment of the monies held by the Venture Capital Funds under management, as well as the day to day support of the companies that have been invested into, and the introduction of appropriate technological innovation into the business and projects, by taking a temporary shareholder position.
A Venture Capital Management Company must perform its activities, with the aim of protecting the legitimate rights of the holders of the Participation Units in the Funds under its management, treating them fairly and justly.
Within the context of the performance of its duties, the Management Company acts independently, and on behalf of and to meet the exclusive interest of the Participants. All activities of the Fund’s management and administration, must be undertaken to meet the highest levels of efficiency, honesty, diligence and professionalism.
How is the investment made in a Venture Capital Fund rewarded?
Unlike many traditional forms of financing, Venture Capital adopts the challenges and risks of the market. Venture Capital investment returns are not equivalent to the interest generated on the capital invested, but are based on the success of the financed company.
The gains of Venture Capital Investors are therefore dependent on the success or failure of the target companies (those that have been selected to invest into).
What is the Venture Capital Investment process?
Before any Venture Capital Investment is made, a specific and detailed analysis of the target projects and companies under consideration is made, as well as their growth potential, profitability and a risk assessment.
Venture Capital participates directly in the share capital of companies, supporting their management and trying to maximize their potential and success, as the return on the investment is directly dependent on the results obtained.
Venture Capital Management Companies play an important role in the management of a fund’s assets, particularly the assets of its underlying companies (or Special Purpose Vehicles “SPVs”). They work closely with the relevant boards of directors, thereby ensuring direct involvement.
Venture Capital Management Companies can be elected or appointed as members of the board of directors of the companies in which the funds under management are being invested. They can also make staff available to provide services to these companies.
How does a Venture Capital fund exit from an investment?
Venture Capital is a short or medium-term investment in a company’s capital. By nature, it is always a temporary investment.
Fund remuneration is dependent on the dividends, capital gains and/or interest generated by the company, and an ‘exit’ from these investments can take any one of the following routes:
- Sale of the participation to other current shareholders (founders or those who have subsequently injected capital). This might have been pre-negotiated at the time of the investment, or at a later stage. Promissory contracts, call and put options and Management Buyouts are the most common routes.
- Sale of the participations to third parties, either to traditional investors or to other Venture Capital Investors (secondary buy-out).
- Sale on a Stock Exchange, this route is particularly relevant when Venture Capital has played the role of bridging finance. There are, however, requirements to be met and this option is as an exception to the rule, as the main scope of venture capital is investment into non-listed companies.