What is Venture Capital?
Venture capital is a booming form of financing among young entrepreneur and at the same time, this has played a crucial role in terms of financing small scale and startup businesses especially those that are considered risky and hi-tech ventures. In all, both developing and developed nations made its mark by offering equity capital so they’re more likely equity partners than just being financiers and they’re benefitting via capital gains.
Both growing and young businesses ought to have proper funding to be able to stay afloat and survive. When financial institutions such as banks and other private financial organizations hesitated to take chance with early stage financing, that’s often when a venture capital firm enters the scene. They will be funding the projects in form of equity that can is referred to as “high-risk capital”. What happens with this is, entrepreneurs need to give up a percentage of their equity but in doing so, they are going to get all the support they need.
Even though there is a misconception that the only interest of venture capital firms are driven mainly by state-of-the-art technology, it is not always the case with regards to venture capital firms. Venture capitalists associate high risks w/ big returns. Needless to say, after the prospects and potential consequences as well as project viability is thoroughly analyzed, this is about the same time that they’re going to make a decision. When everything is set and done, it makes the venture capitalist to be in partnership with the entrepreneur. The truth is, this service seems to be new to some people but it is already being taken advantage of by many.
Primarily, venture capital is centered on growth. These venture capitalists are interested more in seeing how small businesses can grow in to a successful lone. They are assisting in setting up the business, fund it and then comes along to see if it will grow. If it is a possible equity participation, venture capitalist will withdraw themselves from the partnership the moment when the company boomed and recovered the money invested by either selling shares or convertible security.
Say that the company has chose to go for a long term investment from the venture capital finance, it will be essential for the financier to have a long term investment attitude such as 5 or 10 years to assist the business.
There’s another type of financing that venture capitalist has which is something you must learn. This is when the capitalist has become active participant in the company’s operation and his or her thinking streamlines on how to multiply and make fast money which will be a win-win situation for both parties.
These things are only few of what you should learn but hope that it helped you know about venture capitalists.