Jody Vender is one of the pioneers of private equity and venture capital in Italy. Born in 1950, he graduated in Economics at Bocconi University in the 70s and he started a successful financial career in Milan, in the 80s, when capital markets were monopolized by stockbrokers and nobody was willing to invest on new ideas. However, he decided to found a company, called Sopaf, being listed in Milan Stock Exchange and operating just in private equity and venture capital, which were two “disruptive” financial activities for that period. Later he worked at Bocconi University as a professor specialized in Corporate Finance until 2005 and he became one of the first members of the Italian “Angel Investor club”. Today he is currently working in a fund, called VSI (Value secondary investments), specialized in secondary market.
What do private equity and venture capital mean? Why do they differ from LBO?
“Private equity and venture capital involve the purchase of minority interest to support an entrepreneur who can have some liquidity problems and he cannot borrow money from banks. Or he is launching a new business and he cannot cover the investment. So these financial activities are regarded as a sort of “good finance” because the main aim is to help companies and encourage the development of capital, without increasing debt. Leverage-buy-out, instead, is a particular case of private equity, where the main actors are interested to acquire the majority of the target firm, therefore they follow speculative objectives”.
If private equity and venture are related to a “good finance”, what do you mean for “bad finance”? Does it have something to do with our financial crisis?
“I think that every kind of financial activities based on too much debt is bad: as we know the leverage is a very common way to increase the profitability and so the value of a company, but it is very dangerous and risky, because it is a bet. The famous expression “bad like debt” is referred to the fact that it can destroy the company it-self, its investors and all the society in general. Think about the American crisis of 2008. There was a common trend, between banks, to grant easily the so-called subprime mortgages, whose collateral were just the value of the houses they were given for. Therefore, when the prices of houses went down, how could these borrowers have paid their loans? This is the cause of the crisis”.
How has the “private equity” world changed from 80s to today? What are your suggestions for a young finance guy who wants to work in this field?
“In the 80s, almost all the companies tried to increase their profits and so their value by using leverage, therefore working in finance mostly meant to study financial models, to do numerical tests and stuff like these ones. Today, due to high competition and other macroeconomic factors, firms have to create added value by focusing on their own businesses, trying to do better than competitors and getting more and more market share. So, financial knowledge has to be mixed with management and control competencies: that is why, to a young student who is interested in private equity and wants to do a career in finance, I suggest not to start just in private equity fund or in any other financial institutions (like investment banks for instance). It is better to start with a job which makes him able to be in contact with clients and with companies: the best examples are consulting companies or firms operating in industrial sectors. Don’t forget that to help companies, you have to know them and what they really do”.
Antonio Cesaro
What do private equity and venture capital mean? Why do they differ from LBO?
“Private equity and venture capital involve the purchase of minority interest to support an entrepreneur who can have some liquidity problems and he cannot borrow money from banks. Or he is launching a new business and he cannot cover the investment. So these financial activities are regarded as a sort of “good finance” because the main aim is to help companies and encourage the development of capital, without increasing debt. Leverage-buy-out, instead, is a particular case of private equity, where the main actors are interested to acquire the majority of the target firm, therefore they follow speculative objectives”.
If private equity and venture are related to a “good finance”, what do you mean for “bad finance”? Does it have something to do with our financial crisis?
“I think that every kind of financial activities based on too much debt is bad: as we know the leverage is a very common way to increase the profitability and so the value of a company, but it is very dangerous and risky, because it is a bet. The famous expression “bad like debt” is referred to the fact that it can destroy the company it-self, its investors and all the society in general. Think about the American crisis of 2008. There was a common trend, between banks, to grant easily the so-called subprime mortgages, whose collateral were just the value of the houses they were given for. Therefore, when the prices of houses went down, how could these borrowers have paid their loans? This is the cause of the crisis”.
How has the “private equity” world changed from 80s to today? What are your suggestions for a young finance guy who wants to work in this field?
“In the 80s, almost all the companies tried to increase their profits and so their value by using leverage, therefore working in finance mostly meant to study financial models, to do numerical tests and stuff like these ones. Today, due to high competition and other macroeconomic factors, firms have to create added value by focusing on their own businesses, trying to do better than competitors and getting more and more market share. So, financial knowledge has to be mixed with management and control competencies: that is why, to a young student who is interested in private equity and wants to do a career in finance, I suggest not to start just in private equity fund or in any other financial institutions (like investment banks for instance). It is better to start with a job which makes him able to be in contact with clients and with companies: the best examples are consulting companies or firms operating in industrial sectors. Don’t forget that to help companies, you have to know them and what they really do”.
Antonio Cesaro