Venture Capital

Venture capital is a type of equity financing that addresses the funding needs of entrepreneurial companies that cannot seek capital from more traditional sources. Venture capital (VC) is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT, software, etc. The typical venture capital investment occurs after the seed funding round as growth funding round in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company. Venture capital is a subset of private equity. Therefore, all venture capital is private equity, but not all private equity is venture capital.   In addition to angel investing and other seed funding options, venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company’s ownership (and consequently value).   Venture capital is also associated with job creation, the knowledge economy, and used as a proxy measure of innovation within an economic sector or geography.   It is also a way in which public and private actors can construct an institution that systematically creates networks for the new firms and industries, so that they can progress. This institution helps in identifying and combining pieces of companies, like finance, technical expertise, know-hows of marketing and business models. Once integrated, these enterprises succeed by becoming nodes in the search networks for designing and building products in their domain.

Venture capitalists typically assist at four stages in the company’s development:]

• Idea generation; • Start-up; • Ramp up; and • Exit

Some of the factors that influence VC decisions include:

• Business situation: Some VCs tend to invest in new ideas, or fledgling companies. Others prefer investing in established companies that need support to go public or grow.

• Some invest solely in certain industries.

• Some prefer operating locally while others will operate nationwide or even globally.

• VC expectations often vary. Some may want a quicker public sale of the company or expect fast growth. The amount of help a VC provides can vary from one firm to the next.

Need of venture capital

• There are entrepreneurs and many other people who come up with bright ideas but lack the capital for the investment. What these venture capitals do are to facilitate and enable the start up phase.

• When there is an owner relation between the venture capital providers and receivers, their mutual interest for returns will increase the firms motivation to increase profits.

• Venture capitalists have invested in similar firms and projects before and, therefore, have more knowledge and experience. This knowledge and experience are the outcomes of the experiments through the successes and failures from previous ventures, so they know what works and what does not, and how it works. Therefore, through venture capital involvement, a portfolio firm can initiate growth, identify problems, and find recipes to overcome them.

Bridge Financing

• Bridge financing is a method of financing, used to maintain liquidity while waiting for an anticipated and reasonably expected inflow of cash. Bridge financing is commonly used when the cash flow from a sale of an asset is expected after the cash outlay for the purchase of an asset.

• Bridge financing is used by companies before their initial public offering, to obtain necessary cash for the maintenance of operations. These funds are usually supplied by the investment bank underwriting the new issue. As payment, the company acquiring the bridge financing will give a number of stocks at a discount of the issue price to the underwriters that equally offset the loan. This financing is, in essence, a forwarded payment for the future sales of the new issue.

• Bridge financing may also be provided by banks underwriting an offering of bonds. If the banks are unsuccessful in selling a company’s bonds to qualified institutional buyers, they are typically required to buy the bonds from the issuing company themselves, on terms much less favorable than if they had been successful in finding institutional buyers and acting as pure intermediaries.

There are two types of bridging finance. Closed bridging and Open Bridging.

• Closed bridging finance is where you have a date for the exit of the bridging finance and are sure that the bridging finance can be repaid on that date. This is less risky for the lender and thus the interest rate charged are lower.

• Open bridging is higher risk for the lender. This is where the borrower does not have an exact date for the bridging finance exit and may be looking for a buyer of the property or land.

Surrender Value

The surrender value or cash value is the sum of money that an insurer pays to a policyholder when the policy is terminated or surrendered before its maturity. It is the savings portion of policies such as whole life and endowment.   Some policies, such as term life insura customer gets nothing back. Do note that the surrender value is not the same as the face value, also known as the actual death benefit, of an insurance plan. The latter is the amount that will met. The face value is always more than the cash surrender value.   Policies with surrender or cash value can be used as collateral for a loan, so policyholders can opt to take a loan from the insurer by borrowing against the cash value of their plans. The cash surrender value is the sum of money an holder in the event his or her policy is voluntarily terminated before its. This cash value is the savings component of most permanent insurance policies. It is also known as “cash value”, “surrender value” and “policyholder’s equity”. This amount is net of any surrender charges and outstanding policy loans and interest thereon.

Money Multiplier

The money multiplier is defined in “commercial bank money”/”central bank money”, based on the actual observed quantities of various measures of money supply,[3] such as “maximum commercial bank money/central bank money” ratio, defined as the reciprocal of the reserve ratio, 1/RR The multiplier in the first (statistic) sense fluctuates continuously based on changes in commercial bank money and central bank money (though it is (legal) sense depends only on the reserve ratio, and thus does not change unless the law changes.   For purposes of monetary policy, what is of most interest is the money on commercial bank money, and in various models of monetary creation, the associated multiple (the ratio of these two changes) is called the money multiplier (associated to that model). For example, if one assumes that people hold a constant fraction of deposits as cash, one may add a “currency drain” variable (currency–deposit ratio), and obtain a multiplier of (1+CD)/(RR+CD).

Surrender Value

value or cash value is the sum of money that an insurer pays to a policyholder when the policy is terminated or surrendered before its maturity. It is the savings portion of policies such as whole life and Some policies, such as term life insurance, do not have a cash value. So when they are terminated, the Do note that the surrender value is not the same as the face value, also known as the actual death benefit, of an insurance plan.

The latter is the amount that will be paid to beneficiaries as long as the terms of the policy are The face value is always more than the cash surrender value. Policies with surrender or cash value can be used as collateral for a loan, so policyholders can opt to take a insurer by borrowing against the cash value of their plans. value is the sum of money an insurance company will pay to the policyholder or annuity holder in the event his or her policy is voluntarily terminated before its maturity or the insured event occurs. lue is the savings component of most permanent life insurance policies, particularly policies. It is also known as “cash value”, “surrender value” and “policyholder’s equity”.

This amount is net of any surrender charges and outstanding policy loans and interest thereon. Money Multiplier The money multiplier is defined in various ways.[1] Most simply, it can be defined either as the central bank money”, based on the actual observed quantities of various such as M2 (broad money) over M0 (base money), or it c “maximum commercial bank money/central bank money” ratio, defined as the reciprocal of the reserve ratio,   The multiplier in the first (statistic) sense fluctuates continuously based on changes in commercial bank money and central bank money (though it is at most the theoretical multiplier), while the multiplier in the second (legal) sense depends only on the reserve ratio, and thus does not change unless the law changes.

For purposes of monetary policy, what is of most interest is the predicted impact of changes in central bank money on commercial bank money, and in various models of monetary creation, the ass ratio of these two changes) is called the money multiplier (associated to that model). For example, if one assumes that people hold a constant fraction of deposits as cash, one may add a “currency deposit ratio), and obtain a multiplier of value or cash value is the sum of money that an insurer pays to a policyholder when the policy is terminated or surrendered before its maturity.

It is the savings portion of policies such as whole life and nce, do not have a cash value. So when they are terminated, the Do note that the surrender value is not the same as the face value, also known as the actual death benefit, of an be paid to beneficiaries as long as the terms of the policy are Policies with surrender or cash value can be used as collateral for a loan, so policyholders can opt to take a will pay to the policyholder or annuity or the insured event occurs. policies, particularly whole life policies. It is also known as “cash value”, “surrender value” and “policyholder’s equity”.

This amount Most simply, it can be defined either as the statistic of central bank money”, based on the actual observed quantities of various empirical (base money), or it can be the theoretical “maximum commercial bank money/central bank money” ratio, defined as the reciprocal of the reserve ratio, The multiplier in the first (statistic) sense fluctuates continuously based on changes in commercial bank money the theoretical multiplier), while the multiplier in the second reserve ratio, and thus does not change unless the law changes. of changes in central bank money on commercial bank money, and in various models of monetary creation, the associated multiple (the For example, if one assumes that people hold a constant fraction of deposits as cash, one may add a “currency In monetary economics, a money multiplier is one of various closely related ratios of commercial bank money to central bank money under a fractional-reserve banking system.

Most often, it measures the maximum amount of commercial bank money that can be created by a given unit of central bank money. That is, in a fractional-reserve banking system, the total amount of loans that commercial banks are allowed to extend (the commercial bank money that they can legally create) is a multiple of reserves; this multiple is the reciprocal of the reserve ratio, and it is an economic multiplier.

If banks lend out close to the maximum allowed by their reserves, then the inequality becomes an approximate equality, and commercial bank money is central bank money times the multiplier. If banks instead lend less than the maximum, accumulating excess reserves, then commercial bank money will be less than central bank money times the theoretical multiplier.   As a formula and legal quantity, the money multiplier is not controversial – it is simply the maximum that commercial banks are allowed to lend out. However, there are various heterodox theories concerning the mechanism of money creation in a fractional-reserve banking system, and the implication for monetary policy.

Central Bank Independence

Over the past decade, there has been a trend towards increasing the independence of central banks as a way of improving long-term economic performance. However, while a large volume of economic research has been done to define the relationship between central bank independence and economic performance, the results are ambiguous. According to the Banking Law, bank supervision comprises the following areas of activity and responsibilities:

entry of banks into and exit from the market and bank business operations (granting operating licenses, supervisory measures, reporting, special administration, liquidation and bankruptcy of banks);

determining the accountability of the bank’s owner for the bank’s operations (internal organization of a bank, audit);
determining the methods for the bank’s risk management (determining the capital and capital adequacy of a bank, risk management);

consolidated supervision of banks (determining the scope and frequency of consolidation, as well as the content of consolidated financial statements);

consumer protection (determining a uniform method for calculating and disclosing loan and deposit prices and other elements of the loan contract and cash deposit contract);

protection of the Croatian National Bank employees involved in bank supervision (liability for damage);

Cooperation with other supervisory bodies in the country and abroad (data processing and communication of information). Central bank independence has defined a number of types of independence.

1. Legal independence

The independence of the central bank is enshrined in law. This type of independence is limited in a democratic state; in almost all cases the central bank is accountable at some level to government officials, either through a government minister or directly to a legislature. Even defining degrees of legal independence has proven to be a challenge since legislation typically provides only a framework within which the government and the central bank work out their relationship.

2. Goal independence

The central bank has the right to set its own policy goals, whether inflation targeting, control of the money supply, or maintaining a fixed exchange rate. While this type of independence is more common, many central banks prefer to announce their policy goals in partnership with the appropriate government departments. This increases the transparency of the policy setting process and thereby increases the credibility of the goals chosen by providing assurance that they will not be changed without notice. In addition, the setting of common goals by the central bank and the government helps to avoid situations where monetary and fiscal policy are in conflict; a policy combination that is clearly sub-optimal.

3. Operational independence

The central bank has the independence to determine the best way of achieving its policy goals, including the types of instruments used and the timing of their use. This is the most common form of central bank independence. The granting of independence to the Bank of England in 1997 was, in fact, the granting of operational independence; the inflation target continued to be announced in the Chancellor’s annual budget speech to Parliament.

4. Management independence

The central bank has the authority to run its own operations (appointing staff, setting budgets, and so on.) without excessive involvement of the government. The other forms of independence are not possible unless the central bank has a significant degree of management independence. One of the most common statistical indicators used in the literature as a proxy for central bank independence is the “turn-over-rate” of central bank governors. If a government is in the habit of appointing and replacing the governor frequently, it clearly has the capacity to micro-manage the central bank through its choice of governors.