Portugalās intention here is capital injection to Portuguese companies. So when A person buys B personās shares of a company, this does not benefit the company. Just shares change hands. But VC funds does not buy shares from other shareholders. Their capital adds to the capital of the company.
For example, a company has a 5 million Euros value and if VC fund invests 5 million, it becomes %50 shareholder of the company. So the company worths 10 million now with 5 million cash. And it makes sense.
From investorās perspective they may be quite similar. But from investeeās perspective, they are extremely different things.
There is a discussion in another thread about this, namely that a lot of these funds essentially bent the law out of shape and created REITs using the VC structure and SPVs in order to get the tax benefits as well as access to GV capital; while maybe this met the letter of the law, it certainly didnāt meet the spirit of it, and that the governmentās fairly unhappy about it but doesnāt know what to do about it. Thereās a few ways of looking at the problem. Iām not sure where the thread is exactly though, but the discussion was fairly recent.
I get your point, but the thing is, there canāt really be some official list of any of these things.
Any lawyer could do your SEF application. Or you could do it yourself if you wanted to; you donāt NEED a lawyer any more than you need one for a D7. So who goes in the official directory? The Portuguese lawyerās association might put together a list, maybe, but of course thatās no statement about how good any of them are.
Whatās a GV qualifying fund? See above, all sorts of things could qualify; itās not limited to āfunds that say they areā. There could be a list of those, if someone wanted to make one like @tkrunning is doing, but itās all just individual effort hereā¦ the government doesnāt care.
Whatās a cultural investment? Could be all sorts of things. Itās not the governmentās problem to figure out what all out there could be valid.
The private sector is filling this gap by offering firms such as GCS and Magwind - who expect to be paid for their servicesā¦
Hi Jonny,
Thanks for sharing! Is there a contact at BPI who could confirm your information on the BPI Portugal FIAA fund, and serve as a lead contact point regarding new investments?
In case you may not want to post publicly, my Twitter @paradisepursuer is open for DMs ā would really appreciate it!
I asked my lawyer about the BPI fundā¦ his response was he was aware of it but had not heard of anyone using it for a GV. Not that he would know what everyone does, but anecdotally he claimed to have done 6-7 with the other fund. So Iād be very curious if it does pan out, because Iām still a couple months away from making my commitment.
@tkrunning I might suggest that this post should be its own thread, since itās not really about comparing funds to one another. Itās not a bad potential thread, just itās a whole bundle of (perfectly valid) questions many of which have nothing to do with looking at data around specific funds and worthy of its own thread.
So, hereās tidbit of the day for those looking at funds. Feed this into your search engine:
site:pitchbook.com manager-name
Not all managers are there. You have to be big enough to matter. However pitchbook is like crunchbase, they cover the PE/VC space, and itās a way funds and folks-needing-capital get together. Itās just a way to get a third-party view of whether a fund manager is real and what their history really is or if theyāre just making shit up. pitchbook itself isnāt freeware but you can get some data out of it this way.
@jb4422 yes, I had heard the same thing. You can split funds but anything that confuses the SEF people slows it all way down. So we were advised not to make it more complicated that it need be.
Iām not sure I understand why that would matter. The law specifically identifies two different types of funds: āinvestment fundsā (āfundos de investimentoā) and āventure capital fundsā (āfundos de capitais de riscoā), so it seems pretty clear āinvestment fundsā would qualify.
The āhookā for the money staying in PT is the ā60% of the value of the investments be made in commercial companies based in the national territoryā requirement.
All that said, I wouldnāt over think this aspect of it. Really all that matters is what SEF will accept and a number of people have reported success using the funds being offered/discussed here so the āSEF acceptance riskā is minimal. And even if SEF were to reject the investment, you could just sell it and pick a different fund.
Hi folks, I would love to hear your thoughts on Explorer IV. I met with them recently and they meet some of my criterion
Non real estate play
The fund is for GV and non GV investors alike with different distribution paradigms because GV investors need to stay above the 350k capital for 5 years
Skin in the game. The GPās invest quite a decent sum of money into the fund
The seem to have some sort of a track record although their last fund was raised quite a long time ago.
I havenāt talked to them. I do notice they donāt show up in pitchbook or crunchbase, but as you say they havenāt really been in the market so much as of late, theyāve been running Explorer III, so maybe that isnāt relevant. I am a little concerned that one of the founding partners just died, which though it isnāt supposed to matter it might. They feel a little niche-y to me versus PV or Oxy or C2. Maybe thatās good (focus) maybe thatās bad (no breadth).
With PE, itās an interesting question of how hands-on they are - are they actively involved in businesses to improve them, or are they more passive investors? If the former, do they really have the skillset in-house to bring value to their purchases? If the latter, how are they extracting value? And if you are a broad-based fund, how much in-house skill can you bring to a diverse set of businesses? Two examples:
C2/MedCap - you have two experienced M&A types from healthcare, focusing on 7 purchases over several years. But the fund does one thing - healthcare. Hope healthcare is a good bet.
PV - 60-some people, plus the folks at Kigeni, lots of experience across a lot of sectors - but can they do a good job across all those sectors? Or does network effect apply? I think you tend to lose something as you lose focusā¦ but itās less of a focused bet too.
Iām not pretending to answer that, Iām just pointing at it as something you consider in looking at PE managers.
Interesting ā¦ thanks Iāve just started on talking to the real PE players and will make sure I give these due consideration. I chatted with Oxy as well and I wasnāt as impressed for multiple reasons. I have a PitchBook subscription and was able to find Explorer in there ( maybe its not popping up on a basic search ). I was surprised to hear that one of the partners passed away ā¦ apparently a founding partner also left the firm unceremoniously a few years ago.
I would definitely choose those āpublicly traded investment fundsā instead of VC funds. Because they are safe, have a long history and very very easy to sell.
Butā¦ When someone subscribe those funds, they buy shares from other shareholders (you, me or Mr. GonƧalves) who sell their shares on the stock market. So, the money goes to the individual who sells shares, not to the company. That definitely does not capitalize any company. When you buy Apple shares, do you think your money capitalizes Apple? It is better than nothing for Portugal but I would consider it ācapital transferā. On the other hand, VC funds really inject capital to the companies.
I think āinvestment fundā term is a much broader term and there may be funds in ācapitalizing natureā. Even those VC funds can be considered a kind of āinvestment fundā.
And yes of course you can sell your units if application is rejected but as you know, rules are changing at 1st January and you may lose the chance for 350K option.
In a technical and literal sense you are correct that buying listed shares on the stock market does not capitalize a company (the company is capitalized when it does the IPO). However, I think this is splitting hairs. If all of the investors sell their shares and no one buys them, the price will plunge and the company has no market for its securities. Again, this doesnāt affect the capitalization of the company but it does undermine liquidity and the ability of the company to continue to raise capital in the future.
I would think the PT government would WANT to encourage investment in listed companies as it helps the entire economy and country, even if it may not literally meet the exact definition of the law. This is the same argument others have made for real estate VC funds. The fund investments are less than 10% of all GV applications. In the large picture it is not a big deal. Why would the government want to kill the goose that lays the golden egg, so to speak when it will discourage investment in the country at a time when it is desperately needed to bounce the economy back.
From the data, you can see that there are only about 10 GVs a month using the fund route (less than 10%). It would be easy for the government to clarify and update the rules for new applications effective 1/1/2022 if this is really a problem. But I donāt really see any issue here.
Hi Joe, was the process for obtaining the certification of investment from the IMGA Acoes fund straightforward? It seems that the equity funds provide that necessary paperwork for the GV application, so I was wondering how that went for a publicly-traded fund purchase. Many thanks for the information!
@jccarraway Yes. Very easy. Bison Bank wrote the letter to my lawyers the day after the fund was purchased. It detailed transfer amounts, number of shares, passport number, etc. Also stated that it was for the GV and the amount that it satisfied.
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tkrunning
(Thomas K. Running)
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