Efficiency Analysis of Sharia Ventura Capital Companies Using Data Envelopment Analysis (DEA) Period 2014 – 2018

Efficiency is one of the performance parameters that theoretically underlies the entire performance of a venture capital company. A lot of research on the efficiency of venture capital companies mostly focuses on conventional venture capital companies. Recently, Islamic venture capital companies have developed in various regions in Indonesia and are operated in a modern and sharia manner like other Islamic venture capital companies. This study evaluates the efficiency performance of Islamic venture capital companies in the period 2014 - 2018 (this study uses annual data) using Data Envelopment Analysis (DEA), where the first step is to measure the technical efficiency performance of venture capital companies using Data Envelopment Analysis (DEA) with using an intermediation approach. Based on the efficiency measurement using the DEA method, it shows that the Sharia Venture Capital Company during the 2014 - 2018 period was still inefficient. The efficiency value of the most efficient venture capital company is 100%. The data used in this study is secondary data, collected from financial reports published by the Financial Services Authority (OJK) and the websites of each company. The sampling technique used in this study was purposive sampling by taking a sample of 5 (five) Islamic venture capital companies. The input variables used in this study are total assets, capital and labor costs. While the output variable includes financing and revenue sharing

Venture Capital Law Renewal: A Solution for Business Convenience and Legal Certainty in Indonesia

Investing, for example, using venture funds, can now be done easily.  Venture funds are raised by venture capital companies and given to investee companies. Problems can arise when the venture capital company does not have a license to operate but carries out activities as if it has a permit. Of course, this can have legal consequences for venture fund investors, investee companies, and venture capital companies. Another problem concerns the legal certainty of venture capital companies for foreigners who wish to invest in Indonesia; foreigners need to be able to judge the appropriateness of the legal products governing venture capital companies. This article is intended to determine the legal consequences facing unlicensed venture capital companies and the legal certainty for foreign investors. This research method uses a normative juridical method by conducting a literature study on the provisions of venture capital companies in Indonesia. Article VCC in Indonesia has contributed to the Indonesian economy by helping businesses grow. However, this growth must be in line with the harmonization of regulations regarding venture law and investment in Indonesia in order to provide legal certainty to prospective investors

Why do European Venture Capital Companies syndicate?

Financial theory, resource-based theory and access to deal flow are used to explain syndication practices among European venture capital (VC) firms. The desire to share risk and increase portfolio diversification is a more important motive for syndication than the desire to access additional intangible resources or deal flow. Access to resources is, however, more important for non-lead than for lead investors. When resource-based motives are more important, the propensity to syndicate increases. Syndication intensity is higher for young VC firms and for VC firms, specialised in a specific investment stage. Finally, syndication strategies are similar across European countries, but differ from North American strategies.

Risk Management in Venture Capital Companies

Venture capital companies are investment entities that focus solely on making investments in startups and early-stage growth companies, attempting to generate above-market returns by taking higher risks in their investments. Making investments in high-risk startup and early-stage growth companies means that venture capital companies have to implement sophisticated and robust processes to identify, analyze, manage and monitor wide variety of different risks associated with small and fast-growing companies that are often developing cutting edge technology and creating new innovative business models. In addition, venture capital companies also have to manage company level risks that are related to business operations and factors, such as reputation, capital raising process, financial contracting and exiting investments. The purpose of this study is to understand how venture capital companies structure risk management strategy and processes on company level. Furthermore, the study attempts to identify what are the most important risks that venture capital companies face in their business and what methods and techniques venture capital companies use to mitigate those risks. The study was conducted using a qualitative research method and the research data was collected through semi-structured interviews in order to gain deeper understanding of the subject matter and the motivations of the interviewees. In total, four interviews were conducted. The interviewees were partners and employees in venture capital companies and other investment companies that had at least one active venture capital fund under their management. All of the participants were selected so that the sample would be as representative as possible. The questions presented were based on common risks and risk management methods found both in studies concerning venture capital investing and literature about venture capital risk management. They were designed to be semi-structured and open-ended so that it would be possible to gain in-depth information about the topics of the interview and to have the option to further explore any of the topics. The findings of the study indicate that venture capital companies are able to manage their risks without creating a formal company level risk management strategy or complex company level risk management structures. Instead, the data shows that venture capital companies use standardized risk management frameworks for evaluating the risks and return potential of individual investments and that the venture capital industry has a fairly standardized set of notable risks and risk management methods that are used to control and mitigate those risks. The results also indicate that reputational risks, risks concerning insufficient or inadequate screening and due diligence processes and the risks of a premature exit transaction have the highest importance of direct operational risks, whereas on the risk management side, the most important methods for controlling and mitigating risks are portfolio diversification, thorough screening and due diligence processes, active monitoring of portfolio companies and careful financial contracting. The analysis of the data also reveals that most of the interviewed venture capital investors do not recognize company level risk management as a major differentiator or competitive advantage when raising capital for a new fund or sourcing new investment opportunities

Why Do European Venture Capital Companies Syndicate?

Financial theory, resource-based theory and access to deal flow are used to explain syndication practices among European venture capital (VC) firms. The desire to share risk and increase portfolio diversification is a more important motive for syndication than the desire to access additional intangible resources or deal flow. Access to resources is, however, more important for non-lead than for lead investors. When resource-based motives are more important, the propensity to syndicate increases. Syndication intensity is higher for young VC firms and for VC firms, specialised in a specific investment stage. Finally, syndication strategies are similar across European countries, but differ from North American strategies

Private Equity, Investment and Financial Constraints – Firm-Level Evidence for France and the United Kingdom

The welfare effects of private equity transactions are debated controversially. We analyze the impact of expansion financing and buyouts by private equity investors on investment of portfolio firms in the UK and France – two countries with different financial systems. Unobserved heterogeneity and the endogeneity of private equity transactions financed by venture capital companies are addressed using dynamic panel data techniques. In both countries we find that portfolio firms display higher investment levels and a lower dependence on internal funds after expansion financing. Buyouts financed by venture capital companies are neither associated with a decrease in investment spending nor with an increase in the dependence on internal finance. In contrary, private equity based buyouts in the UK outperform non-private equity backed British firms in terms of both indicators. Contrasting the notion of several policy makers,we cannot detect that private equity based buyout financing yields higher financial constraints on average.Investment, financial constraints, private equity employer-to-employer, linked employer-employee

Venture Capital Sector in Pakistan: Ratio Analysis Approach for Financial Performance Assessment

The purpose of study is to rank the venture capital companies operating in Pakistan during the period of 2006-2009 on the base of their financial performance. Ratio analysis technique was used to rank the venture capital companies using profitability / efficiency ratios and total assets as proxies of financial performance. This study concludes that TRG Pakistan Limited is at first in ranking on the bases of return on assets (ROA), return on equity (ROE), and total assets, and at second on the base of earnings per share (EPS). AMZ Ventures Limited is at first on the base of earnings per share (EPS), at second in ranking on the bases of return on assets (ROA), return on equity (ROE), and total assets. TMT Ventures Limited is third on the bases of all ratios, and total assets. This is the first attempt that was made with an objective to facilitate the students, investors and management of company with useful information regarding financial performance of all venture capital companies operating in Pakistan

The Performance of Publicly Traded European Venture Capital Companies

The stock market return and the risk of 33 quoted European venture capital companies during the period 1977-1991 are studied. The return is negative on average with eight of the 33 companies having a return that is higher than the market return. However, the systematic risk (measured by the beta of the stock) is lower than the market risk. When taking the risk into account, no company has a return that is significantly higher than zero, but four companies have a return that is significantly lower than zero. When interpreting these results, one has to take into account that most shares of venture capital companies trade at a significant discount relative to their net asset value, indicating that the long-term return that investors can expect in the future, may be higher than in the past. Venture capital companies that are specialized in a specific investment stage have a higher return, while the regional companies have a lower return than general companies. The systematic risk of specialized companies is higher than that of general companies

The Legal Reform of Venture Capital Financing Institutions As a Financing Alternative for Micro Small and Medium Enterprises

So far, the role of venture capital has not been optimal, or it can be said that while it is not working. In practice, in Indonesia, venture capital companies carry out their business like banking. That until now, in general, venture capital companies practice more as credit providers as the usual practice of providing bank loans. All requirements and conditions requested for a business partner company (actually: a debtor) are like a bank in giving credit. Therefore a legal reform of venture capital financing institutions is needed to optimize financing for micro, small, and medium enterprises to realize national development

Kedudukan Otoritas Jasa Keuangan Pada Perusahaan Modal Ventura Asing

The juridical basis for supervision of foreign venture capital companies is contained in the provisions of Capital Law No. 21 of 2008 concerning the Financial Services Authority (OJK), Presidential Regulation No. 9 of 2009 concerning Financing Institutions and Minister of Finance Regulation No. 18 / PMK.010 / 2012 concerning Venture Capital Companies. Foreign venture capital companies that invest directly in Indonesia are a form of foreign investment. This is inseparable from the wide scope of foreign capital, which is defined as capital owned by foreign countries, individual foreign citizens, foreign business entities, foreign legal entities, and / or Indonesian legal entities whose capital is partly or wholly owned by foreign parties. Supervision of foreign investment is carried out by the Investment Coordinating Board in accordance with the provisions of Law No. 25 of 2007 concerning Investment. In accordance with the provisions in Permenkeu No. 18 / PMK / 0.10 / 2012 explained that the scope of supervision of venture capital carried out by the OJK is only limited to PMV Indonesia (Cooperatives or Limited Liability Companies). The implication is that OJK cannot supervise foreign PMVs that carry out direct financing. Because financing activities by foreign venture capital companies have intersecting rules, it is appropriate that foreign venture capital regulations only follow one specific rule. The regulation regarding financing institutions is only regulated in a Presidential Regulation. Although hierarchically, the status of the Perpres is an implementing regulation of the Law, the substance it regulates is not identical with the provisions of the Law which mandates it. Therefore, the provisions regarding financing activities should be regulated in a separate La