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.
In order for newly startups and growing businesses as well, it is critical for them to be funded well. When financial institutions similar to banks as well as other private financial orgs hesitate to take the plunge of giving early stage financing, that is when venture capital firms enters the game. 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 are associating high risks with 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. Venture capitalists become partnered with the entrepreneur automatically. As a matter of fact, this service may seem to be new for some but it’s something that many are already taking advantage of.
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. Now say for example that it is a potential equity participation, venture capitalist is going to withdraw themselves from the partnership and when the company was able to recover the invested money from them.
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 is also other forms of financing that venture capitalist has which you should 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.