Everything You Must Know About Venture Capital
As a matter of fact, venture capital is a new form of financing that has become a major boom among entrepreneur and at the same time, this plays a critical role in financing small scale and startup businesses and also 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 are going to fund the project in form of equity which could be coined as “high-risk capital”. With this, the entrepreneur might have to give up some of their equity but in exchange, they’ll get the full support they needed.
Despite the fact that there’s a misconception that the main interest of venture capital firms are primarily driven by state-of-the-art technology, it isn’t always the case when it comes to venture capital firms. Venture capitalists associate high risks w/ big returns. Well quite frankly, they won’t be making any decisions not until they have checked thoroughly the prospect, the possible consequences they might face and project viability; after all, this is still about investing in new business so they have to be careful. The venture capitalist automatically becomes partnered with the entrepreneur. 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. 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. 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’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.
Hope that these things have given you enough idea on what venture capitalists is about.