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. 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.
Both growing and young businesses ought to have proper funding to be able to stay afloat and survive. More often than not, venture capital firms enter the scene only when financial institutions just like banks are doubtful of financing early stage businesses. 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.
When it comes to venture capital firms, they always get a bad stigma of only wanting to focus on state-of-the-art technology, which is totally a misconception. 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. Venture capitalists become partnered with the entrepreneur automatically. Whether you believe it or not, this service is being taken advantage of already by many different businesses today.
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 will help in each and every step of the way from setting it up, providing the funding needed and check if it’ll 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 capitalists has played an active role in the operation and think of ways that can help them make money fast.
Hope that all these things have provided you sufficient idea regarding venture capitalists.