A venture capital company is an investment company that takes high risk in order to gain high rate of return. The venture capital company also takes active part in guiding the funded company. The venture capital is one type of private equity capital and is generally provided by the outsider investors to the new and growing business.
The venture capital involves cash exchange for sharers in the investee companies and usually involves high risk and promises to return above average. The venture capital is an investment made in a highly risky suggestion to make a high rate on interest. Venture capital plays an important part in starting up or at the early stages of the companies.
The venture capital companies or firms raise the fund from various sources. There may be different types some of which are kept for short periods again some are kept for long periods.
Financial structure is the term referred to the entire composition of the funds in the organization and the short term funds are excluded and the composition of the long term funds is known as the capital structure.
To get a venture capital, which is the ultimate dream of many companies, the firm has to develop a winning business plan because it is the business plan that can earn a company its venture capital.
If the business plan is flawless, the other factors of a company that a venture capital company checks are proprietary intellectual property, management team members with experience and expertise, the market size and the current valuation that promises for a good return after investment. Identifying the right venture capital company may the most challenging job for any company. A venture company generally bears some preferences for location, stage preferences, the backgrounds of the partners, sector preferences and lastly the total asset held by the particular company. In order to get a venture capital, the companies should make sure that the preferences of the venture capital company match with theirs.
Venture capital finance can be helpful in nurturing entrepreneurship, inducing technological advancement and stimulating innovation and creativity to a great deal. The financial institutions and private sector companies thus need to give effort to create a growing prospect for the venture capital market. A broader perspective on the functioning of venture capital financing is required so that it acts as a financing instrument to finance those wide ranges of products that include high-risk and high-return profile.
Last Updated on : 22th July 2013