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Capital Q Ventures: Empowering Companies, Enriching Investors, and Fueling Entrepreneurial Spirit.

What Is a Business Development Company (BDC)?

A business development company (BDC) is an organization that invests in small- and medium-sized companies as well as distressed companies. A BDC helps these firms grow in the initial stages of their development. With distressed businesses, the BDC helps the companies regain sound financial footing.

Similar to closed-end investment funds, most BDCs are public companies whose shares trade on major stock exchanges, such as the American Stock Exchange (AMEX), Nasdaq, and others. Some BDC are Private which is generally during their seed or emerging fund sponsor stage

KEY TAKEAWAYS

  • A business development company (BDC) is a type of closed-end fund that makes investments in developing and financially distressed firms. 
  • Many BDCs are publicly traded and are open to retail investors, some early stage BDC are Private.
  • BDCs offer investors high dividend yields on Debt and Venture Capital type appreciation potential.
  • BDCs’ may use leverage for small business or distressed company turnaround targeting which can make them relatively high-risk investments.

Understanding Business Development Companies (BDCs)

The U.S. Congress created business development companies in 1980 to fuel job growth and assist emerging U.S. businesses in raising funds. BDCs are closely involved in mentoring and developing the companies in their portfolios because it is in a BDC’s best interest to help them become successful.

BDCs invest in private companies and small public firms that have low trading volumes or are in financial distress. They raise capital through initial public offerings or by issuing corporate bonds and equities or forms of hybrid investment instruments to investors.

The raised capital is then used to provide funding for the struggling companies. BDCs can use different financial instruments to provide capital, but in general, most issue loans or purchase stocks or convertible securities from the companies.

Qualifying as a BDC

To qualify as a BDC, a company must be registered in compliance with Section 54 of the Investment Company Act of 1940. In addition, it must be a domestic company whose class of securities is registered with the Securities and Exchange Commission (SEC).

The BDC must invest at least 70% of its assets in private or public U.S. firms with market values of less than US$250 million. These companies are often young businesses seeking financing or firms suffering or emerging from financial difficulties. Also, the BDC must provide managerial assistance often called a “Mentoring Mandate” to the companies in its portfolio.

KEY FACT

Business development companies avoid corporate income taxes by distributing at least 90% of their income and realized capital gains to shareholders.

BDCs vs. Venture Capital

If BDCs sound similar to venture capital funds, they are. However, there are some key differences. One relates to the nature of the investors each seeks. Venture capital funds are primarily available to large institutions and wealthy individuals through private placements. In contrast, BDCs allow smaller, nonaccredited investors to invest in them, and by extension, in small growth companies.

Venture capital funds keep a limited number of investors and must meet specific asset-related tests to avoid being classified as regulated investment companies. On the other hand, BDC shares are traded privately and typically become traded on stock exchanges and are constantly available as investments for the public.

BDCs that decline to list on an exchange must follow the same regulations as listed BDCs. However, less stringent provisions for the amount of borrowing, related-party transactions, and equity-based compensation make the BDC an appealing form of incorporation to venture capitalists who were previously unwilling to assume the burdensome regulation of an investment company.

Press Release

Orlando, Florida, December 14, 2020, Capital Q Ventures (“CAPQ”), a leading alternative investment specialty hedge fund manager and the architect of the Tri-Party Venture Fund®, has announced a sub-advisory agreement with Little Rock, Arkansas based BRS Financial, a multi-family office wealth management firm which touts a process built around the coupling of generational family office management, financial planning, and asset management.

“We view these components as inseparable in the prosperous multi-generational and financial success of high-net-worth investors. That is our goal: To help BRS Financials’ family office clients achieve success in all aspects of their finances and we believe adding key alternative investments, such as Tri-Party Venture Funds® to their platform will help their Registered Investment Advisors achieve their clients’ long-term goals.” says Michael “Q” Quatrini Capital Q Ventures, President and CEO.  

The companies will operate as separate business unit operations.  BRS Financial will begin offering Tri-Party Venture Funds® to its investors, with its family office services to be accessible to CAPQ’s team of wholesalers, which is being expanded to accommodate these new offerings.  CAPQ initial funds mandates’ will be launched to BRS Financial investors through its Galo Specialty Fund LLLP and Medical Investment Solutions LLLP, two of its newest Tri-Party Venture Funds® which are non-correlated, non-diversified targeted strategies, associated with “best-of-breed” Venture Partners, who have been in business operations for over 25-years with proven investment strategies over 10-years, and which were hand-selected by CAPQ. This will allow family officed clients, to invest in the Tri-Party Venture Funds® as the master solution for their respective needs, at the same time allowing asset managers to take advantage of an additional gathering channel for their alternative investment strategies. Alternative offerings, such as National Restaurant Brands LLLP and Hospitality Investment Solutions LLLP will be announced and made available in 2021.

This is a natural evolution of CAPQ´s business model as the company has invested in boosting its alternative investment services through family offices since its inception. Through this new family office service offering, clients will be able to take full advantage of the tools available through BRS Financial, in particular its front-to-back generational wealth management and business succession system, with alternative investments coming from CAPQ.

CAPQ has identified the need to support its family office clients to optimize their novel closed-end fund architecture and to outsource part of their family office investment value chain – from portfolio construction to full implementation – in the current market and regulatory context. On the fund side, these services will continue to help their placement partners navigate the distribution landscape.

With this new service, CAPQ will provide clients a one-stop-shop to access their family office management needs. This will allow for greater flexibility in future Venture Partner selection as well as improved investor data collection and monitoring.

Justine E. Tobin, CEO of Tobin & Company Securities, is managing CAPQ’s team of investment professionals to bring these offerings to the market. The current team, with a solid domestic presence and strong governance, will be further enhanced with new profiles being created in the firm’s product management as well as multi-asset/multi-manager portfolio expertise.

Michael “Q” Quatrini, Capital Q Ventures CEO said,

“We are delighted to announce our plans to work with BRS Financial to expand Capital Q Ventures Family Office Solutions through a sub-advisory agreement to our clients. Capital Q Ventures has always been close to our clients and we understand the new challenges they face in today´s market. Capital Q Ventures is ideally placed to offer such solutions at a large scale and in an efficient way, offering independence from both the distribution and fund operations side.”

About Capital Q Ventures,

Capital Q Ventures specializes in Capital Partnerships with Companies in need of Venture Capital and supporting the “BDCs” and “Tri-Party Venture Funds®” that serve them. Capital Q Ventures was founded with a simple vision of serving the financial needs of companies while enriching our investors and promoting the “entrepreneurial spirit” in our communities. We will never stop believing that serving entrepreneurs, serving investors, and serving our communities are mutually exclusive pursuits.  From the very beginning, we were committed to the success of our Venture Partners and deliver the resources that inspire them, their employees, families, and communities. We put the full weight of our resources, fund advisors, management team, and selected investors behind our portfolio companies. And we’re results-driven! We not only expect future benefits in the form of positive returns on investments, but we also want to work with honest people who have a vision of the future in which we want to live in. While returns may consist of capital gains and investment income, including dividends, interest, and other income, we also believe in improving the lives of all the people we encounter professionally. https://capitalqventures.com

About BRS Financial

Through BRS family of companies, they provide a comprehensive suite of advisory and consulting services to their highly successful clients. These services fall under three categories. Consultation, including business succession planning, investment banking, and real estate development. Risk management and fixed products, including insurance and annuities. And wealth management under its Registered Investment Advisor (RIA) firm, BRS Financial, LLC.  https://brsconsulting.com/

CONTACTS:

Capital Q Ventures
Bruno Quatrini,
bquatrini@michaelq83.sg-host.com

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A Tri-Party Venture Fund® – Organized for Qualified Investors.

By: Capital Q Ventures

ORLANDO, Fla. – Aug. 30, 2019 – PRLog — Capital Q Ventures Inc. (CAPQ) today announced the launch of its newest Tri-Party Venture Fund®, named Galo Specialty Fund LLLP. This new actively-managed fund, which is expected to launch September 1, 2019, will be offered to qualified investors and is a non-diversified closed-end investment fund, wrapped around, Clube Atletico Mineiro, a major league soccer team from Brazil founded in 1908. Commonly known as Atlético Mineiro or Atlético, and affectionately known as “Galo” (the “Rooster”) which is the team’s beloved mascot, the team takes roots as being one of the international teams responsible for establishing Brazilian Football (soccer) as the most popular sport in all of their country and now the entire world.

“The Tri-Party Venture Fund® strategy, is to identify and maintain mutually exclusive agreements with quality companies as their pre-qualified “Venture Partners”, as Capital Q Ventures Inc. has reviewed its past funding performance and believes that the Venture Partner has demonstrated verifiable, historical, consistent, sustainable and replicable business models that financing would provide above-market, risk-adjusted returns to investors, admitted as Limited Partners to the Fund,” said Michael “Q” Quatrini, CEO of Capital Q Ventures. “We believe this type of concentration into high-value target Venture Partners, gives positive investment exposure and can serve as an effective inflation hedge and also provide value in mitigating volatility risks.”

CAPQ’s new fund will bring a new entrant to the hedge fund category, which while inconsistent with a more broadly indexed passively managed ETF, attempts to spread the investment over the full gamut of companies in a selected investment pool, regardless of company performance. Tri-Party Venture Funds® seek to separate themselves by investing solely in debt and to a lesser extent equity financing arrangement, in what CAPQ believes are the “best of breed” companies in each category.

The Fund will offer Partnership Units, at a $250,000 investment minimum through its Dealer Manager, Tobin & Company Securities LLC, headquartered in Charlotte, North Carolina. The Galo Specialty Fund Prospectus is available for certain accredited Investors at GaloFund.com.

Actively managed by Capital Q Ventures’ experienced investment teams

The Galo Specialty Fund will seek to outperform the S&P 500 by investing in private senior secured debt and to lesser extent equity of its Venture Partner and its financing needs, such as Senior Secure loans, Mezzanine Loans, equity participation transactions, and joint venture funding situations, which add an additional layer of inflation protection.

Capital Q Management LLC, will serve as the fund’s advisors, bringing their deep experience and expertise to the management of the fund. Capital Q Ventures assigns an industry analyst team to be embedded into the Venture Partners financial operations, becoming specialists rather than generalists as key fund strategists, analysts, and portfolio managers, with uncommon access to the Venture Partner and trends within its business.

Tri-Party Venture Fund®: Rewards and risks

Tri-Party Venture Fund® investments can be appealing for investors seeking a hedge against inflation, especially as inflation shocks have been historically volatile and hard to predict. Additionally, the separation of a Company’s performance from the performance of its debt service and to a lesser extent its equity investments, while non-diversified can offer benefits to a balanced portfolio, as their returns tend to move independently from those of exchange-traded ETFs, bonds, and equities. However, there can be considerable risks with Tri-Party Venture Funds®, including episodic financial cycles, which may tend to lower returns over extended periods.

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About Capital Q Ventures

Founded by Michael “Q” Quatrini, Capital Q Ventures is one of the world’s premier investment management companies. CAPQ specializes in partnering with Companies in need of Venture Capital and supporting the “Tri-Party Venture Funds® ” that serve them. Capital Q Ventures was founded with a simple vision of serving the financial needs of companies while enriching our investors and promoting the “entrepreneurial spirit” in our communities. We will never stop believing that serving entrepreneurs, serving investors, and serving our communities are mutually exclusive pursuits. From the very beginning, we were committed to the success of our Venture Partners and deliver the resources that inspire them, their employees, families, and communities. We put the full weight of our resources, fund advisors, management team and selected investors behind our portfolio companies. And we’re results-driven! We not only expect future benefits in the form of positive returns on investments, but we also endeavor to work with honest people who have a vision of the future which we want to live in. While returns may consist of debt and capital gains income, including dividends, interest, and other income, we also believe in improving the lives of all the people we come in contact with professionally. The firm is headquartered in Orlando, Florida. For more information, visit capitalqventures.com.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, Galo Specialty Fund LLLP, in any state in which such offer, solicitation, or sale would be unlawful before qualification under the securities laws of any such state. Information contained in the preliminary prospectus for Galo Specialty Fund LLP is subject to completion or amendment.

For more information about Capital Q Venture’s visit, Capitalqventures.com or call (407) 307-CAPQ to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about the fund are contained in the prospectus; read and consider it carefully before investing. Copies of the final prospectus can be obtained from GaloFund.com. Please note that information in a preliminary prospectus is subject to completion or amendment.

·       All investing is subject to risk, including the possible loss of the money you invest.

·       Investments in non-diversified investments may involve risks different from, and possibly greater than, those of investments in the underlying Venture Partner securities or assets.

·       Although Tri-Party Venture Funds®, seek to provide inflation protection, their Net Asset Value (NAV) or book value may change when interest rates rise or decline.

·       The Fund could lose all, or substantially all, of its investments in instruments linked to the returns of its Venture Partner or financing investments.

·       The Fund is a Hedge Fund which is an alternative investment, and even a small economic decline in the U.S., in Brazil and elsewhere could cause large losses.

·       Tri-Party Venture Fund® is a registered trademark, owned by Capital Q Ventures Inc.

The Efficient Market Hypothesis, or EMH, is an investment theory whereby publicly trade share prices reflect all information and consistent alpha generation is impossible. Theoretically, neither technical nor fundamental analysis can produce risk-adjusted excess returns, or alpha, consistently and only inside information can result in outsized risk-adjusted returns.

According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. If this is true it should be impossible to outperform the overall market through expert stock selection or market timing, and the only way an investor can possibly obtain higher returns is by purchasing riskier investments.

I guess Mr. Warren Buffett might disagree, and EMH is highly controversial and often disputed. Believers argue it is pointless to search for undervalued stocks or to try to predict trends in the market through either fundamental or technical analysis.

Data compiled by Morningstar Inc., in its famed Active/Passive Barometer study, supports the EMH. Morningstar compared active managers’ returns in all categories against a composite made of related index funds and exchange-traded funds (ETFs). The study found that year-over-year, only two groups of active managers successfully outperformed passive funds more than 50 percent of the time—U.S. small growth funds and diversified emerging markets funds. In all of the other categories, including U.S. large blend, U.S. large value and U.S. large growth, among others, investors would have fared better by investing in low-cost index funds or ETFs.

Amazingly, we believe Tri-Party Venture Funds may have the potential, over a longer period of time, to finally “Debunk EMH”, as a non-diversified pooled investment fund with pre-qualified Private and Public Venture Partners, who have demonstrated historical, replicable, and consistent returns over years of investment performance. Making for a new Investment theory, which is near synonymous, encompassing a novel body of knowledge that we use to support the decision-making process of CAPQ Funds, in our qualifying Venture Partners, and not trying to chase individual investments. We pre-set asset pricing models, which are then applied in determining the asset-specific required rate of return for our Venture Partner and hence our funds’ investments, and in pricing derivatives and exit timing on the investments, for trading or hedging.

When I’ve spoken with several institutional investors and family offices at various industry events, our discussions have inevitably turned to “concession funding rounds” for Hedge Funds. And often I hear the same thing: “Why should I be the first investor in? On many levels, it’s only natural for Limited Partners to wonder why they would want to be the seed capital into a newly organize investment fund. At the same time, there are some misperceptions about concession funding rounds that are worth sorting out. Consider the following:

The fund sponsor has put in all the work. They’ve assumed all early-stage costs, as well as execution, and fund organizational cost risk. Why would they then offer early-stage investors the ability to participate in the GP’s success by giving concessions?

Newly organized funds will generally have a plan to reward their early-stage investors into their funds. In doing so their goal is actually twofold. They want to reward those first movers but they also want to be able to report higher ROIs, in an effort to attract additional down-line investors due to the fund’s momentum and higher investment returns paid based on the concessions they end up giving.

Concessions don’t mean they are giving it away for free. Investing is all about measuring and taking risks and the market adjusted rewards investors expect to receive on that risk. This, in many ways, is the defining ethos of investing, which is why so many sponsors balk at the practice of giving concessions away on the first money into their funds. Though many equate it to investor handouts, it helps them attract more downline investors thereby creating economies of scale lowering the funds costs for everyone.

Pride of ownership creates more enterprise value. Sometimes when you buy a new car, you’ll take extra notice of others on the road who drive the same one. In some cases, they may give you an appreciative nod or even a wave, almost as if they want to revel in the experience of ownership with you.

On a much grander scale, especially with new Fund Sponsors, the same thing holds true within the institutional investor community. When other prominent investors become the fund’s limited partners, a much stronger sense of pride, validation, and shared responsibilities for fund success begins to emerge.

Naturally, the structure of certain fund concession programs could be a huge component of that LP’s success. When Institutional investors, and in many cases, key family offices do better, they credit their successes at a much greater pace than the subsequent fund investors. This does mean Fund Sponsors have added pressure, based on maintaining their momentum, and are motivated to perform at even higher levels for their downline investors. Another factor is human nature. Most people want to be a part of something emerging and larger than themselves and to rally around a common cause, which can be even more prevalent when there is a new product or investment thesis as in the Case of our Tri-Party Venture Funds®, whose interest has seemed to captivate many mainstream institutional investors.

Considering both the financial and intrinsic rewards associated with concession funding rounds, it makes sense that the most efficient and professionally run fund sponsors are the ones that offer it. Accordingly, firms that share their rewards with their early investors also tend to have higher performance and loftier NAVs—all of which benefit fund sponsors.

Nearly 30 years ago, the Red Hot Chili Peppers sang, “Give it away, give it away, give it away now.” When confronted with the prospect of granting a concession to early-stage investors, that is what many successful sponsors think about, when planning concessions the conundrum be damned.

Yet, what fund sponsors need to realize is that concession rounds aren’t about giving it away. Just as often, it’s about what they can gain: a structure that rewards the first movers and illustrates performance attracts others, creates economies of scale, boosts value, and helps to ensure they will enjoy the rewards associated with the initial sweat equity they’ve put in and fortifies the underwriting.    

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