Management Analysis : Venture Capital Management Essay example

Management Analysis : Venture Capital Management Essay example

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Management Summary
Venture capital organizations provide funds for a variety of new business ventures and is a vital component of business creation. Venture capital acts as a catalyst for new business development and, more generally, economic growth, by providing budding organizations necessary start-up capital in exchange for either equity or debt. According to the National Venture Capital Association, venture capital investment over the past 30 years is responsible for the creation of more than 7.6 million jobs in companies generating over $1.3 trillion in revenues.
The greater Pittsburgh region has seen an explosion of new business start-ups in the last decade. Much of this activity is an outgrowth of the strong health and technology research being done at institutions like UPMC and Carnegie Mellon University. This new trend also provides an excellent business opportunity: namely, venture capital. However, while there has been great growth in the rate of start-up creation in Pittsburgh, the growth of venture capital availability has not kept pace. From 2006 to 2011, the amount of venture capital investing decreased in Pittsburgh. In recent years, this trend has improved, but there is still a great need for more venture capital investments. This business plan proposes the creation of Hills and Mills Capital (HMC) venture capital fund, a subsidiary of Crescent Capital Group (Crescent), to take advantage of the local need for more early stage investment capital.
HMC’s goals are to help local business creators fulfill their dreams by providing capital and assistance, and provide attractive returns to its investors in the 15-20% IRR range. To do this, HMC will invest in local start-ups with strong management teams and the potent...


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...the fund and managers of the fund. Individual investors within Crescent will invest as part of the limited partnership. These limited partners will also receive an 8% preferred return on their investment.




Crescent HMC (Fund Manager)
LLC Investors







HMC Fund 1, LLC


Figure 3 Fund Ownership Structure Diagram

Fund Size and Fee Structure
Initially, all funding will come from Crescent and individual investors within the Crescent ownership group directly. Crescent will pledge to provide $1 million to HMC’s initial fund. HMC’s managers will invest $100,000 and invest this amount as the general partner. HMC will have control over the investments, investment sizes, and investment criteria. HMC will obtain a management fee of 2.5% of the funds under management ($25,000 per year) to pay for overhead costs.

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