Now it's time to enter inside the functioning of a private equity investor. As you know, all around the world we have evidence of very different legal entities. For example, in Europe we have close-end funds or investment firms, while in the US we have venture capital funds and SBICs, In the UK, we have venture capital trusts, so there are very different legal entities all around the world. But despite the fact that we have very different legal entities, the functioning of private equity behind the legal entities is exactly the same, because it is based on two different players working together. On one hand, we have managers managing the money of investors that are the other players, that decide to commit their money into certain legal entities. For this reason, the management of a private equity firm is exactly the same in whatever kind of legal entity all around the world. For this reason we have to start talking about the managerial process. The managerial process is the day-by-day activity of managers managing money of investors. If we want to highlight what are the characteristics of the managerial process, we have to use the criteria that both the academia and practitioners really love to use to qualify the day-by-day life of legal entities investing in private equity. The four activities that qualify the managerial process are: fundraising, investing, managing and monitoring, and exiting. There are four different activities. Even though the first activity, fundraising, is completely separated from the other three; because, if you remember, fundraising is an activity preliminary to the starting of the legal entity. For example, in a closed-end fund an asset management company has one and a half years of time to convince investors to commit their money into the closed-end fund. It’s exactly the same for venture capital funds in the US, where the general partners have one year of time at their disposal to convince limited partners to commit their money. Fundraising is completely separated from the other three activities. But if the managers are able to get the entire amount of money, that means they are able to get to time 0, the legal entity can start the activity, and in that very moment, the other three activities can happen; because everyday, managers have the problem of investing the money of investors, which is the phase of investing. Everyday managers have the problem of managing and monitoring the investment they made in certain companies, and everyday managers have the very complex problem of exiting. Where exiting, if you remember, is the only way in which a private equity firm can generate a capital gain, an IRR. If we wanted to say something more about the four activities, we'd say the fundraising is quite tough, because general partners, the managers must convince investors to commit their money into the vehicle. This process could be absolutely free, as it happens in the US and UK, or it could be supervised as it happens within the European Union running, for example, a closed-end fund. If the managers or the general partners are able to convince investors, we stay in time 0. And if managers want to start investing their money, in the certain sense, they have two different problems, because on one hand before investing money, they have to evaluate the company. That means understand if the value, the business plan of the company, really makes sense. But, on the other hand, if managers or general partners decide to invest their money, they have to negotiate what are the main characteristics. The main mechanisms supporting their stay in the company. If the decision of investing is made, we have another phase. The other phase is the phase of managing and monitoring. Where managing and monitoring means the private equity investor is now a shareholder of the venture-backed company because the private equity investor decided to invest To be a shareholder is quite complex because you have to stay in the board of directors where you have to interact with the entrepreneur, where you have to support and to sustain the activity of the company everyday. But if managing and monitoring is successful, there is the last phase. The last phase is the phase of exiting, where exiting means identifying another investor that would like to buy the stake in which the private equity investors decided to invest. This is not easy because we are outside of the stock exchange. There is the problem of pricing, there is the problem of liquidity, but it's the fundamental activity. Because only through the exit, the private equity firm is able to generate a capital gain, where capital gains means an IRR for the private equity investor.