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 What is venture capital?  |
Venture capital is equity based financing for private companies, usually provided by experienced, professional fund managers, who take an active interest in the affairs of the venture.
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| Who are the investors of the funds managed by Prosperitas? |
The Investors in UIVC-1 are the MIF, tthe CAF, he partners of Prosperitas Capital Partners, and private investors.
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| What kind of business does Prosperitas invest in? |
There are no restrictions as to in which segment investments are made. However, from time to time, there might be higher interest in specific activities, which does not prevent investments from being made in other areas. It is essential that the proposed investment has great growth potential, with returns higher than those obtained in the traditional financial market. Due to this fact, Prosperitas focuses on small and medium-size businesses connected to the technology segment with the majority of their revenue coming from exports, where the best opportunities to obtain profit are found.
Most of our investments will focus in the Information Technology sector, Services and AgroIndustry.
When we make an early stage investment (Seed or First Round), we look for a long-term vision, extremely strong core technology and a management team capable of growing successfully the business. In later rounds, we look for rapidly growing companies, poised to be leaders of large markets and led by a high quality management team.
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| What does Prosperitas contemplate in an investment opportunity? |
Prosperitas selects companies that:
· Have a well defined and structured management team;
· Its business envolves in a large and growing market;
· Provide unique products or services with added value;
· Offer an attractive potential return over the investment to be made, with clear opportunities for divestment.
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| At what stage does Prosperitas prefer to invest? |
As an active, hands-on venture partner, we prefer to get involved with early stage companies. We like to work closely with entrepreneurs and management to help build a great company.
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| Can I raise venture capital if all I have is an idea? |
Raising venture capital with just an idea has become very difficult, especially after the burst of the .com bubble. Most traditional venture firms will focus on companies that have established operations and management and have developed or completed its products or services. Raising capital for an idea-only business almost always requires soft money from Angel investors, which is typically accomplished through a private placement.
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| Are investments by Prosperitas debt or equity based? |
We primarily make equity-based investments or debt/equity investments that convert to equity at a later stage. We are not lenders and do not participate in debt-only investments. If you are looking for a debt-only investment, we may be able to find you a suitable debt-partner.
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| Do you invest in young, but more developed companies? |
Yes. Most of our venture capital investments are made in young and growing companies that are already operating and generating revenue. However, we do not generally participate in expansion capital or mezzanine financing. For such financing requirements, we may be able to find you a suitable financing partner.
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| How much equity does Prosperitas require for an investment? |
It depends entirely on the amount of the investment, the valuation of the company, the stage of the company, the future potential for growth and the proposed exit strategy. Our policy is to make investments where the founders and management of the company maintain a majority ownership.
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| How much does Prosperitas invest in each company? |
Investment opportunities will be evaluated more for their merits than for the size of financial resources needed. In general, the invested resources range from US$ 150,000 to US$ 1.000,000.
Typically Prosperitas will look for others investors that would co-invest with Prosperitas and bring additional value to the company.
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| How many investments does Prosperitas make every year? |
To support the close working relationship we build with our portfolio companies we tend to make a small number of investments each year. On the average, we take on about 2-4 new commitments per year, in addition to follow-on investments in current portfolio companies.
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| Is it true that most investors are ready and willing to invest and fund quickly? |
Not true. Most businesses are in the 11th hour crisis by the time they are seeking funding. The time span from the moment the proposal is received, reviewed, approved and funds distributed can be lengthy. It will take from 3 to 6 months for a positive response, assuming your proposal, projections, marketing strategy and management team are strong. It is imperative that a well-prepared business proposal be produced in order to have a chance at raising money in that time frame.
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| What role does Prosperitas play in the investment? |
In addition to the investment of financial resources, Prosperitas' proposal is to assist the invested company in defining and implementing its business strategy, and to actively participate in the company's Board of Directors.
Despite always holding a minority participation in the invested companies, Prosperitas dedicates time and resources to assist the companies in achieving their objectives. Prosperitas understands that its investment success will always be linked to the achievement of the intended results by the entrepreneur.
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| Does Prosperitas acquire the invested company? |
No. Funds managed by Prosperitas will mostly contain a minority participation (less than 50%) in the invested company's capital. We expect that the entrepreneurs have the responsability for the management of the business.
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| Does Prosperitas seek control? |
We usually have a meaningful minority equity position commensurate with a fair valuation and one seat on the Board. We do not wish to become involved in the daily operatons and expect management to control the company. We expect to attend Board meetings and participate in major decisions undertaken by the venture.
We're not bankers, lawyers or financial sharks interested in taking over your company. We're entrepreneurs turned venture capitalists with extensive operating experience. We think like you, work with you and support you by taking an active role in management and the board without limiting your overall control.
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| What is Prosperitas' position after investing into a company? |
Prosperitas takes different positions. It strongly depends on the stage in which Prosperitas has invested in the company: from a very intensive engagement during seed financing to a mere attendance of board meetings once the company has reached a certain market position. In early company phases, Prosperitas will always be more involved and support the company in relevant entrepreneurial decisions.
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| What type of return is Prosperitas looking for? |
At liquidation (merger, acquisition, IPO or buy-back), most early-stage VC firms are looking for returns of about 5 times of their investment. While returns vary by industry and deal structure, a company with lower than 30% annual return on investment will have difficulty obtaining venture capital and should consider alternative funding sources.
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| How does Prosperitas develop its analysis process? |
The analysis process starts with a thorough evaluation prior to the investment decision-making. Prosperitas' team will work together with the entrepreneurs and their management in order to learn about the company's management, products, technology, strategy and need for long-term capital. Prosperitas usually asks from the applicant company audited financial statements.
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| What is the process after I submit my executive summary for review? |
After we receive your executive summary, one of Prosperitas' associates and/or partners will review and evaluate your opportunity for investment. If we determine your opportunity is not a good fit, we will inform you that we are not pursuing an investment. If we determine that your opportunity may be a good fit, we will contact you to request more information (often a full business plan, management resumes and any other relevant information). If we are interested in learning more after reviewing this information, we will setup face-to-face meeting to get to know you, your team and your opportunity in more detail.
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| How long does it take Prosperitas to make an investment decision? |
A typical decision time frame is three to six months.
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| What type of exit strategy is Prosperitas looking for? |
Prosperitas' preferred exit strategy depends on what is most suitable for your company and can include a merger or acquisition, an initial public offering (IPO) - not that likely, or management buyout.
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| What do you consider an attractive time period for a company's exit strategy? |
Our fund (UIVC-1) has a lifespan of 10 years. Therefore, like most VC's, Prosperitas is looking for companies that can reach an exit event in 3 to 6 years.
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| What kind of duties and agreements are there between the company and Prosperitas? |
The duties are those existing between shareholders in a public company, and as a general rule, establishes each one's rights and duties in the company's social capital. Specifically, the majority shareholder will have to consult Prosperitas as to social statutes, sale of the company control, extension of debts and assets alienation. These and other subjects will be agreed between shareholders and Prosperitas Such agreements are, in the case that the investment is in stocks, a Shareholders' Agreement and a Subscription Agreement.
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| Does Prosperitas charge fees? |
There are no fees associated with our assessment of potential investments.
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| What about confidentiality? |
We consider investment ideas to be confidential and proprietary and we regard them as such. Due to the high volume of business plans we are exposed to, we are unable to sign a Non Disclosure Agreement (NDA) during the initial stage of discussion, if we find the opportunity interesting and will enter into deeper detail then we will sign an NDA.
It is our belief entrepreneurs should have a high level of trust in their venture partners and we work hard to maintain our credibility in that regard.
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| Shouldn't Prosperitas sign an NDA before getting the Exec Summary? |
Like the majority of VC's, we do not sign NDA's because it would open us up to potential litigation and would seriously limit the number and type of deals we may want to evaluate for our portfolio. The following are links to articles that illustrate (in serious and comical ways) why VC's do not sign NDA's:
http://news.com.com/
http://www.thevc.com/
http://www.billsnow.com/
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| How many business plans does Prosperitas analyse per year and how many of those receive funding? |
An average of 8 to 10 requests are sent to Prosperitas per month via e-mail, fax or mail. Most of them are complete business plans, some are executive summaries or PowerPoint presentations. Some entrepreneurs call us before. We take every single one seriously and intensively study each request.
The average number of investments per analysed business plan in the VC industry is below 1% (mature markets), based on the fact that we are the first VC in Uruguay , we believe there are still a good number of companies looking for investmen, so we expect this ratio to be around 3%.
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| How do I start the process with Prosperitas? |
Email info@prosperitascp.com . We prefer a business plan or at least an executive summary of the venture to assist us to understand the opportunity.
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| What should be submitted to Prosperitas for an applicant company to be analyzed? |
The company Business Plan is required (or at least an exec summary), preferably developed by the entrepreneur himself. This plan should present the project to be developed, the market it is part of, the financial, technological and human resources needed, the activity forecast and the conditions the entrepreneurs have to attain the proposed goals.
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| What topics should be addressed by my plan? |
We recommend the full business plan will cover the following:
1. The business
- Short description of company's business
- Mission statement
2. Market
- Historic and projected size
- Market trends
3. Product Offering
- Product description
- Current development status and projections
- Differentiation
- Revenue generation
4. Distribution
- Key customers
- Sales channels
- Partnerships
5. Competition
- Key competitors
- Barrier to entry
6. Management Team
- Team background
- Board composition
7. Financials
- Current balance sheet
- Projected cash flow (first two years by quarters)
- Projected head count by functional area (G & A, sales, marketing, Product Development)
8. The Deal
- Amount to be raised
- Valuation asked
- Use of proceeds
An executive summary or a condensed version of the full plan may also be appropriate for initial consideration.
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| How should an effective presentation for Prosperitas look like? |
In our experience, the following contents help to get a good understanding of a proposed investment. In general, the presentation should not exceed 15 to 20 transparencies to be shown with a digital or overhead projector.
1. Business
- Business model
- Mission statement
2. Product / Service
- Description of the product/service
- Development roadmap
- Unique selling point
- Pricing model
3. Market
- Trends
- Market development and expected market size in €
- Customer need/demand satisfied by the product/service
4. Sales
- Distribution channels
- Partnerships
- Customer structure
5. Competition
- Potential competitors
- Competitive advantage
6. Team
- Professional background of the management team
- Consultants/members of the supervisory board
7. Finance
- Income statement (historically; and planned for the next two years on a quarterly basis)
- Projected cash-flow (quarterly; next two years)
- Balance sheets (last three years; next two years)
- Headcount development plan for the respective business sectors (development, sales, marketing and administration)
8. Funding
- Capital requirements
- Company valuation
- Use of funds
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