◆ Angel Investment

Angel Investment (A

gels I

vest) refers to the personal contribution to assist entrepreneurs who have specialized technology or unique concepts but lack their own funds to start a business, and bear the high risk in entrepreneurship, and enjoy the high returns after the success of the business. Or a one-time upfront investment in an original project or small start-up by a freelance investor or informal venture capitalist.

As a type of venture capital, angel investment has the following characteristics, as shown in Table 2-4.

◆ Venture capital

Venture Capital (Ve

tu

e Capital, also known as venture capital, refers to a kind of equity capital invested by professional financiers in emerging, rapidly developing and highly competitive enterprises. Specifically, venture capital invests capital in the production and operation of technology-intensive, innovative products or services based on high technology and knowledge.

Venture capital invests venture capital in the early stage of the development of a start-up enterprise, and converts the invested capital from equity to capital through the market exit mechanism after it matures to obtain returns. The operation process of venture capital is divided into the financing process, the investment process, and the exit process.

Venture capital is an incubator for enterprise growth and transformation of scientific and technological achievements, and mainly has four major functions: financing, asset allocation, property rights flow, and risk pricing, as shown in Table 2-5.

◆ Private equity investment

Private equity investment is an equity investment in an unlisted enterprise in the form of private placement, and the future exit mechanism is taken into account during the implementation of the transaction, that is, through listing, mergers and acquisitions or management buybacks, etc., to sell the shares for a profit.

In a broad sense, PE invests in companies in various stages such as seed stage, start-up stage, development stage, expansion stage, and maturity stage. PE in the narrow sense mainly refers to private equity investment in mature enterprises that have formed a certain scale and generate stable cash flow, mainly refers to the private equity investment part in the later stage of venture capital, and M&A funds and mezzanine capital account for a large proportion of the capital scale.

Private equity investment funds are an important force in promoting the sustainable development of the capital market. The rapid development of the private equity fund industry will provide a new way to improve the return rate of the financial industry, and also provide an effective way to solve the financial difficulties of private small enterprises, and open up the demand for industrial and financial capital profits.

◆ The relationship between angel investment, VC and PE investment

Angel investing is a type of venture capital. Venture capital generally has a large amount of investment, and it is invested in management at the same time as the capital is invested, and the investment will gradually increase with the development of the invested enterprises. The amount of angel investment investment is generally small, one-time investment, does not directly participate in enterprise management, and the choice of investment enterprises is more based on the subjective judgment and even preferences of investors.

Although PE and VC are both investments in pre-IPO companies, they are very different in terms of investment stage, investment scale, investment philosophy and investment characteristics.

The simple way to distinguish between VC and PE is as follows: VC mainly invests in the early stage of the enterprise, and PE mainly invests in the later stage. Of course, the division between the early and late stages makes VC and PE different in terms of investment philosophy and scale. PE is in the seed stage, start-up stage, development stage, expansion stage, maturity stage and P stage

Enterprises in various stages of e-IPO are invested, so PE in a broad sense includes VC. Under the fierce market competition, the business penetration of VC and PE is becoming more and more extensive. Many traditional VC institutions are now involved in the PE business, and many institutions that have traditionally been considered to specialize in PE business are also involved in VC projects. In other words, PE and VC are only a conceptual distinction, and the boundaries between the two are becoming more and more blurred in actual business.