The first factor is probably the most crucial. VC investors pay the utmost attention to the quality of a company's management and are capable of distinguishing good managers from ineffective ones. They will tell you that good ideas are a dime a dozen, but that people who are able to implement them are rare. That is why VC investors appreciate expert managers and know how to take care of them. In particular, they introduce incentive schemes for the senior management team that are tied to the company's performance and growth in value. For many a good manager, cooperation with a VC investor may turn out to be the chance of a lifetime.

Each VC fund has its own investment policy that focuses on selected industries or regions, or prefers certain stages in a company's development. Also, each fund has a specified minimum and maximum size of investment. Therefore, before contacting an investor it is worth checking whether your company's industry, its investment needs and level of maturity meet the preferences of a given fund. Information about investment preferences of the funds belonging to the Polish Private Equity Association (PSIK) is available in this yearbook and on the Internet at www.psik.org.pl.

What do the preferences mean in practice? For example, an IT-oriented fund will not be interested in a construction business, even if the submitted investment project is otherwise attractive. In Poland there are both funds that specialize in certain areas and others that have no special industry preferences. Preferences relating to the development stage of a company show if a given fund provides only startup and seed capital, or capital for expansion and development, or financing for restructuring, for privatization, or for management buyouts and buy-ins. Minimum investment means that a given fund does not consider investment plans smaller than a given amount (e.g., one hundred thousand euro, or one million euro). In general, smaller funds have a lower minimum threshold, while larger funds have a higher minimum investment. Maximum investment means that a given fund does not engage in a single venture worth more than a given sum. However, when the capital needs of a good venture exceed that limit, a VC investor may find a suitable partner (or partners) for co-investment.

PE/VC funds engage in companies to a varying degree, by buying anything between several percent of the shares and the entire stake in a business. Unlike trade investors, they tend not to take direct management positions in companies, although they are always active investors, even if they have only a minority stake. PE/VC investors work on supervisory boards and monitor the company's results and their conformity with accepted plans. Some entrepreneurs are unwilling to let 'outsiders' into their company, as the thought of sharing profits and control can be difficult to accept. In such cases they have to choose between having more control over a smaller and weaker company, or less control over a bigger and stronger one. These matters are discussed openly and in detail during negotiations that precede the initial investment.

Another fundamental issue that is discussed during the negotiation stage is the VC fund's future exit from the company. This is because one of the principles of VC funds is to hold shares in any given company for only a limited time. Their strategy is to provide fresh capital for specific projects to increase the company's value, and then to sell the shares at a profit. The exit may take the form of an IPO, a trade sale, a buyout by the management or the remaining shareholders, or a sale to another investment fund. Some VC funds make a portion of their shares available through options to the management well before exiting.