Venture Capital

Venture capital is a popular way to raise funds in the initial stage of a new company or ventured in a short period. Those who invest money in such a company are called Venture Capitalist. The venture capitalist gets equity or share in the company in return for investment. Hence they have a common role in the decision of the company. Venture Capitalist not only provides financial support to the company but also guides the company in important matters. This consultation may be related to technical or management proves helpful in taking the company forward. Venture capital is a highly risky investment and attracts investors with the highest return potential. Only after evaluating industry management business plans and permission estimates of growth, then they decide to invest money in a venture or not. This race is for start-ups and new ventures, many of them are successful, many become unsuccessful and money is invested by looking at the possibilities of success of start-ups or ventures. Sometimes the money invested in these gives unexpected returns. Also goes wrong, if the business plan does not proceed properly, then all the plans remain closed.

How Venture Capital works ?

As we have said in the appropriate sentences, Venture Capitalist can give venture capital to an entrepreneur or start-ups whom believes has the potential to make a profit because no one has any objective in business loss. Therefore, Venture Capital assesses various features in this venture so that it can conclude that they should invest in that venture for willing to get higher return. If he was interested in the offer made by company or any start-ups, Venture Capitalist would work hard to gather information about the business that would include, among other things, a thorough examination of the company's business model product management and operating history because most venture capital is from supporting a large amount of investment in a selected project or business. Therefore, before investing, he conducts a thorough investigation of the business. All those business persons are available near them, who are connected to different fields and for business plans and business. They have the ability to do analysis and make decision on it.

Feature of Venture Capital

High Risk - Venture capital usually do investment in a highly risk project for willing to get higher return.

Equity Participation - Venture capital main objective is to sell the shares when firm get a profitable position so that they will get a high profit.

Long Term Investment - Venture capital financing is a long-term investment. It generally takes a long period to encase the investment in securities made by the venture capitalists.

Participation in Management - In addition to providing capital, venture capital funds take an active interest in the management of the assisted firms. Thus, the approach of venture capital firms is different from that of a traditional lender of banker. It is also different from that of an ordinary stock market investor who merely trades in the shares of a company without participating in their management.

Advantages of Venture Capital

They bring wealth and expertise to the company.
Large sum of equity finance can be provided.
The business does not stand the obligation to repay the money.
In addition to capital, it provides valuable information, resources, technical assistance to make a business successful.

Disadvantages of Venture capital

As the investors become a part of owners, the autonomy and control of the founder is lost.
It is a lengthy and complex process.
It is an uncertain form of financing.
Benefit from such financing can be realized in long run only.

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