Analysis of Union Square Ventures Raising New Tech Fund Article - Case Study Example

If the company which has founded in 2003 can raise the capital it desires it would impress a lot of skeptics that believe that the New York scene is not as powerful and rich as it once was. Two of the best investments of Union Square Ventures were Twitter and Zynga. Since 2004 those investments have helped raise the value of the fund by more than double. In 2008 Union Square Ventures had an internal rate of return of 23%. The track record of the company will help the firm raise the capital it desires for its new fund.

During the first half of this year, U.S. venture firms have been able to raise $8.14 billion. This figure represents an increase of 20% in comparison with the same period last year. The industry has become more compressed since that money was raised by 50 firms which are 31 firms fewer than last year. The company is seeking to expand by creating a new fund. The strategy is a great idea because the new fund will generate the company additional revenues that will make Union Square Ventures grow.

Despite the optimism of the company the firm has to be realistic about its ability to raise the desired fund goals. A new strategic approach the company can implement is to raise the money in three stages. The firm could seek three $50 million fund investments. After the final round of capital raising the three funds will be consolidated and turned into one. The first fund should market a portfolio strategy of investing a lot of money in technology companies. These types of stocks are in high demand among investors on Wall Street.

The other fund should seek out a diversification strategy targeting companies that have lots of potentials to grow internationally. The third fund should target a passive conservative strategy of investing in the money markets including corporate and governmental bonds. The overall strategy of dividing the fund into three stages increases the chances of the company raising more capital. The company after stage one would start the fund. The three stages of fundraising should occur in four-month lapses to complete the fund within one-year.

I learned from class that venture funds are investments that have the potential of generating tremendous returns because professional financial managers make the decisions of how to invest the money to obtain the best return possible while minimizing risks.