What is Venture Capital?
Venture capital is actually a new financing form that boomed for young entrepreneurs and at the same time, this plays a pivotal role in financing small scale and startup businesses as well as risky and hi-tech ventures. Basically, developed and developing countries have made their mark by way of providing equity capital so by that, they act more of an equity partner instead of being financiers and they benefit 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 associate high risks w/ big returns. Obviously, after analyzing thoroughly the prospects as well as potential consequences and project viability, that’s about time when they will make a decision. The venture capitalist automatically becomes partnered 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. Venture capitalists are more interested in seeing small businesses growing to a bigger one. 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 they become an active participant of the company’s operation and their thinking streamlines to how they can multiple and make quick money that’ll be a win-win scenario for both ends.
These things are only few of what you should learn but hope that it helped you know about venture capitalists.