PA Venture Capital firm invests in a video website

NextStage Capital LP has co-led a first round venture investment of $1.2 million in a company whose Web site enables people to find and share user-generated videos on the Internet.

The Audubon, Pa., venture-capital firm co-led the investment in Magnify.net, which is based in New York. Magnify.net, which announced the investment Monday, said it will use the money to accelerate its growth. In a 90-day beta period prior to the official launch of its Web site, Magnify.net was used to create more than 2,000 channels with more than 200,000 videos.

Buyouts drive record fund-raising activity in 2006 – Boston Business Journal:

“Despite a mellowed climate for venture capital, private equity fund raising saw a record pace in 2006, with mezzanine and buyout fund raising enjoying a banner year.

“The last two years have been record breaking years in terms of fund raising,” said Alex Tan, private equity research manager for Thomson Financial, “so there’s a lot of money out there. But a lot of the money has been raised by the biggest players, and that’s what’s going to make it more interesting for 2007.”

Angel investors fund new photo service – Philadelphia Business Journal:

Preclick Corp. said Thursday it has closed on a $1.6 million first-round, venture-capital financing and is using the money to launch an Internet photo-sharing service similar to the video-sharing service provided by YouTube Inc.

The investment came from three groups of the wealthy individual investors known as angels located in the Philadelphia area — LORE Associates, Mid-Atlantic Angel Group and Robin Hood Ventures — and SJF Ventures of Durham, N.C.

You have thought about using a venture capitalist to fund your start-up. What are some preliminary questions you should answer to prepare yourself?

A venture capital (VC) fund is a pooled investment vehicle (often a partnership) that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans.

What are the cons of using a VC?

A VC will highly scrutinized your company’s governance and performance. Essentially, you will partner with a third-party in exchange for capital. This means you will lose ownership and control. For example, if you company is performing poorly, your VC may fire your CEO.

What are the pros of using a VC?

On the other hand, most VC’s have extensive business knowledge and access to resources and valuable contacts. So, while you are losing control, you are gaining business value and expertise.

What will the VC look for?

VC’s, are generally looking for a 10x return on their investment. Will your company experience significant growth or this a lifestyle business which provides you with a comfortable living? Can you provide a detailed budget to support your claim that your business will experience such significant growth.

The VC will review your company’s financial documents to determine whether your team expertly understands your business operation, management, and metrics. A VC will compare your company to other public and private companies in your market, as a benchmark.

Alternatives to VC:

Bootstrap –can you reach certain milestones without venture capital? Can you spread the cost of a large purchase over a longer period of time (such as a lease)?

Friendlier sources of capital–government, banks, credit unions, friends, family, savings

Existing Funding Relationships -do you have a relationship with funding sources that will be more receptive than VC?

You should decide to seek venture capital only after considerable thought and planning.