M3
Case analysis
MACLEAN PALMER
SAMUEL ENCARNACION
SUNY ESC
M3 Case analysis.
Maclean Palmer’s case.
Maclean Palmer and the decision to create a new venture capital fund
Venture capital funds
Venture capital funds are investment funds that manage the money of investors
who seek private equity stakes in startup and small to medium sized enterprises
with strong growth potential. These investments are generally characterized as
high-risk/high-return opportunities. In the past, venture capital investments were
only accessible to professional venture capitalists, although now accredited
investors have a greater ability to take part in venture capital investments.
(Investopedia, 2015)
The main advantage of approaching venture capital companies is that they are
very professional. As they normally invest in other companies too, they are likely
to have interests in complementary products or services. So, if you join as a
portfolio company, they are likely to offer more opportunities and create synergies
between you and the other companies. (Leong, Tan, & Leong, 2014)
From the first moment, the idea of Palmer and his partners, had a lot of ambition,
which entailed a great sacrifice on the part of them, who in August of 2000 took
the hard decision to undertake this idea, carrying as consequences, that they had
to give up their jobs, sell their houses, move with their families to Boston and so
on. Without a doubt, they were determined enough to support the sensitivity that
this decision could produce in the nucleus of their families.
Palmer’s team.
Palmer did not have a random team, Palmer had formed a tremendous team,
according to the abilities and skills that each one could offer him. For example,
Clark was a principal with Ninos Capital with 7 years of mezzanine experience.
Palmer explained that there was an advantage to bringing together people who
were previously unknown to each other:
One way to think about a private equity firm is that it is only as good as the
combined talents and networks of its team members. For this reason, he wanted
to set up a group that could bring to the table a diverse set of skills, contacts, and
perspectives.
Risks.
There is a great risk associated with investment and startups that are in their early
stages, with a great potential for growth but also with an uncertain future. That
risk, in turn, also means that the reward can be very important. For example, the
business model of Venture Capital funds consists of investing a certain amount
of money in several startups to diversify risks and with the hope that in that group
of companies some reach success, offering high profitability either through its
sale to another company.
Outline of a private placement memorandum to market the fund to potential
investors.
-Founder: Mr. Maclean Palmer. 2000.
-Partnership: Limited.
-Return of principal: 75 – 85% of capital gain.
-Risk factors: lack of operating history.
Who should invest in a venture capital fund.
As it states in exhibit B, flows of VC, limited partners should invest in a venture
capital fund, such as:
-Pension funds.
-Individuals.
-Corporations.
-Insurance companies.
-Foreign.
-Endowments.
Works cited
Fiorina, C. (2007). Ethics in a corporate life. Recovered from
https://ecorner.stanford.edu/video/ethics-in-a-corporate-life/
Investopedia. (2015). Venture Capital Funds . Recovered from Investopedia:
https://www.investopedia.com/terms/v/vcfund.asp
Leong, K., Tan, W., & Leong, E. (2014). Venture Capital : How to raise funds for
your business . Marshall Cavendish.
