Interesting. For a layman like me, I don't get the part about us not contributing capital to this investment fund. Where would the money come from then, and exactly how do we benefit from it?
http://www.sportspromedia.com/news/barcelona-news-technology-startup-investment-fund
Money would come from private investors.
-They would be looking for a ROI, potential exposure to these new technologies/innovations, or solely PR purposes and partnerships .
-For example say Barca was setting up a fund to invest in innovative sport nutrition companies. Maybe some big name conglomerate that has a big stake in global sports nutrition i.e. PepsiCo would be interested in contributing to the fund.
-I guess there are some public economic agencies that could contribute also, for the sake of spurring economic growth, in the region i.e. Cataluyna, but early stage investment is widely regarded as high risk/high reward so getting money from these agencies is more complicated in early stage tech.
-We would benefit from the fund through investing in equity and debt investment and receiving an ROI through exits, mergers and acquisitions.
To put it in the simplest way possible:
-Say PepsiCo contributes 1m to invest in sports nutrition companies. The terms here is key, it could be an donation, where they run a PR campaign and market a partnership with FC Barcelona to help advance sports nutrition or it could be more of loan to the fund where they expect a ROI i.e. interest payments.
-Say we invest in this money in two companies (500K each) for an equity stake
-5 years down the line, one of these companies goes fails but the other one becomes quite successful and the 500k of equity we initially bought is now worth about 2m.
-Since PepsiCo is our investor we can introduce this company to them so they can get 'first dibs' on the company should they be interested in acquiring the technology.
-Now say this successful companies undergoes a merger or acquisition and we get paid out our shares 2m.
-We can pay back PepsiCo the money on the agreed terms i.e. interest etc...and then we pocket the rest for ourselves.
-So what was initially a 1m investment in two early stage companies (one failure and one success), gave us a ROI of 2m.
A lot of logistics missing in that example, but the general concept of it is how it works.
