Venture Capital: An Option for Investors, a Salvation for Startups
Publish On 30, Sep 2017 | Venture Capital: An Option for Investors, a Salvation for Startups
In September, the unveiling of iPhone 8 and iPhone X threw IT enthusiasts into a frenzy of excitement as they waited with bated breath to be the next proud owners of these new iPhones. However, these Apple products that people were so thrilled about would not even have come into existence, and Apple would never have risen to the status of the world’s tech juggernaut without people who recognized the brilliant idea of Steve Jobs and the financing that they brought to the table known as venture capital.
Venture capital (VC) is a financial investment in companies that have potential but lack capital or do not have the credit to take out loans from banks and are in need of capital from other sources. Venture capitalists earn profits on their investments and even greater returns by selling their stocks when the startups they invested in successfully get themselves listed in the stock market.
VC owes its origin to the United States. During World War II, Georges Doriot, dubbed the Father of Venture Capital, founded the American Research and Development Corporation (ARDC) and enjoyed remarkable success with his investment in other ventures such as Digital Equipment Corporation (DEC), which helped him achieved a staggering rate of return of 101% from 1957 to 1968.
Despite high return rates and initial explosive growth, venture capital hit its low in 1980. However, it later rose to prominence again in 1990 thanks to the advent of computers and the internet, which gave rise to a slew of capital-hungry companies and ventures, including Digital Equipment Corporation, a computer giant in the same league as IBM, Apple Inc., where Steve Jobs invented his legendary Apple computer, and Genetech, the world’s second largest biotech company. Other companies that have been given opportunities and support by venture capital are big names in tech such as Facebook, Google, Instagram, and Whatsapp, which have, of course, yielded tremendous returns for their VC firms.
Since 2015, with the rise of startups and small and medium enterprises (SMEs) in Thailand, venture capital has become better known among Thai people. Mainly targeting new-generation entrepreneurs and companies, venture capitalists usually focus on long-term investment of 3-5 years and play the role of the company owner, offering financial advice and other recommendations to help the business grow rapidly, so that both they and the companies they have invested in can thrive with stability and sustainability. The ultimate goal is for these startup ventures to become listed in the stock market. VC firms usually share these characteristics:
- Expectation of high returns in proportion to the high risk
- Long-term financing (three years upwards)
- Definite investment periods
- Professional capital management
For those interested in alternative investments, VC is another good option as it can yield annualized gross rates of return of 15-30%. In addition, venture capitalists will have the opportunity to foster and mentor fledgling ventures or businesses with great potential. Therefore, VC presents another attractive alternative for today’s investors.
SCG has founded a corporate venture capital (CVC) firm named AddVentures to make investments in startups in Thailand and overseas to enhance their potential. AddVentures is looking for digital technology ventures that are in alignment with SCG’s business and are in these three major target groups, namely the Enterprise, Industrial, and B2B groups, in order to offer commercial cooperation, intellectual property licensing, and venture capital.
Startups that are interested in collaborating with AddVentures can find additional information at www.addventures.co.th and facebook.com/AddVenturebyscg or LinkedIn: AddVentures by SCG.