Hi, welcome back.
So we're talking about alternative sources of financing.
So now let's talk about joint ventures.
So joint ventures,
it's basically an alternative to a way of generating capital, right.
Typically a joint venture is,
in other words, you're not using capital budget funds per se.
You're actually teaming up with someone, another organization,
a partnership, typically [COUGH] or co-owned corporation or an LLC.
So two or more organizations joining forces to achieve a kind of
joint strategic and financial objective.
A joint venture can be either short term
joint venture where you have a specific thing you're going to do, and
then once you've achieved that specific thing, the joint venture is wound down.
Or it could be a long term joint venture where, let's say, back in the day when I
was in the interview business, a lot of the terminals and
depots were joint ventures that were shared between the various oil companies,
energy companies that use the services of the terminal.
So one of the things that's important to do is understand the type of
partner that you want to bring into the joint venture and
what contributions each of the partners can bring to the table.
So the reason you might form a joint venture is that you can
either enter a new market or develop a new market.
You can build a new product,
and they have a special joint venture specifically to build the product.
You might want to share technology with someone,
and hopefully then develop products from the technology that you've shared, or
you could take complementary technology.
Let's say an organization has technology which compliments what you're doing,
you can perform a joint venture, put the two technologies together, and
then you have, as the saying goes, the sum is greater than the individual parts.
And then it also enables you to pool resources so
it takes less resources, generally, for each partner.
They pool their resources and they can do production and distribution.
And it's another way of acquiring capital that
doesn't take it all out of your capital budget fund.
A lot of times people will form joint ventures when they're working on
a specific government contract because the government contract will have
specific terms and conditions about what each organization's bringing to the table.
So they form this joint venture and
everything is kind of run through the joint venture so
they can all have accountability for what they're doing on the contract.
And then it also helps that, let's say you have a product or
service that you have created and then the partner has a distribution arm or
a sales and marketing function that is let's say cognizant of the markets and
or have distribution arms that you don't currently have.
You can form a joint venture and then access that information,
that distribution, that sales and marketing capability.