small introduction to the origins of risk capital
Today we are going to make you a small introduction to the origins of risk capital. The risk capital is characterized, in principle, investments in companies that do not quote in capital markets. These venture capital companies can generally find in the capital markets the opportunity to make their investment liquid.
It is interesting to make a historical approach to the origins of risk capital. The risk capital has its beginnings in the US economy of the fifties and sixty. It is at this time that the first activities of the contemporary risk capital concept are identified, that is, investments in companies that are in the initial development phase. These investments used to be starring families with a lot of money and not by private companies.
One of the great inflection points was the development of new products and technologies that were taken in California, and where part of these investments was received.
As of the 70s and entered the 80s, these United developed a specific legal and normative framework that facilitates and promoted risk capital investments. It is right at that time where the first major operations of history are recorded, operations carried out by the first private companies that are dedicated to this type of activities. Of these companies, Kohlberg, Kravis and Roberts (KKR) was the first and today is one of the most important risk capital companies in the world.
The years advanced and in the 90s there was a savings and credit crisis that triggered financing costs, which caused a cooling of risk capital investments. It was not until the second half of the 90s when the industry emerges and the risk capital investments is consolidated.
There has been a level of saturation of venture capital companies, due to the remarkable growth and development lived by the industry in recent years. This has caused the increase in competition for acquisitions, which has caused the expected return levels of investments to be reduced.
This has caused that the main companies dedicated to risk capital investments have chosen to diversify their activities towards other segments with less competition, for example, becoming debt suppliers instead of own capital.
Others have specialized in infrastructure investments, mainly because these activities implies a lower risk level than traditional investment.
The historical evolution of venture capital companies confirms that there has been a transformation of what were originally ventured capital companies. In addition, while the founders had one more venture capitalist spirit, the new generations seem to have a greater rejection of risk, derived from the experiences of the market environment of the last crisis.
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