Venture capital is often a new kind of financing that has come as a boon for young entrepreneurs and it plays a strategic function in financing compact scale enterprises and high technologies and risky ventures. In all of the developed and establishing nations it has made its mark by giving equity capital, so, they may be extra like equity partners as an alternative to financiers and they’re benefited via capital gains.
As young and growing organizations have to have capital in the appropriate time, not only to float their enterprise inside the market place, but also to survive in the lengthy run. When financial institutions like banks and also other private financial organizations hesitate to take the risk of early stage financing, since the credibility with the budding firm is just not established, venture capital firms comes in to the foray to fund the project within the kind of equity which can be termed as “high threat capital”.
Although there is a misconception that the interest of venture capital firms are mainly driven by cutting edge technology in the industry, it is not always the case with all venture capital firms. A venture capitalist associates high risk with huge profits. Of course after thoroughly analyzing the prospects and consequences and the viability of the project. The venture capitalist becomes a partner with the entrepreneur in his business. True venture capital financing need not confine itself to high end technology products, any risky idea with great potential can be financed and venture capital is an all powerful mechanism to promote and institutionalize entrepreneurship.
Mainly venture capital focuses on growth. A venture capitalist is very much interested to see a small business growing into a larger one. He assists in setting up the business, funding it and comes all along to seethe firm grow. If it is a potential equity participation, the venture capitalist can come out of the partnership once the company becomes profitable and take back his money by selling the shares or convertible securities. If the firm opts for a long term investment from the venture capital … Read the rest