On Types of Venture Capital
There are three major types of venture capital–early stage financing, expansion financing and acquisition or buyout financing. The various types of venture capital are classified as per their applications at various stages of a business.Early Stage Financing
Early stage financing has three sub divisions – seed financing, start up financing and first stage financing. Seed financing is basically a small amount that an entrepreneur receives for the purpose of being eligible for a start up loan.Start up financing is given to companies for the purpose of finishing the development of products and services. However, this form of venture capital may also be used for initial marketing as well. Companies that have spent all their starting capital and need finance for beginning business activities at the full-scale are the major beneficiaries of the First Stage Financing.
Expansion Financing
Expansion financing may be categorized into second-stage financing, bridge financing and third stage financing or mezzanine financing. Second-stage financing is provided to companies for the purpose of beginning their expansion.Third-stage financing is also known as mezzanine financing. It is provided basically for the purpose of assisting a particular company to expand in a major way. Bridge financing is useful in many ways. It may be provided as a short term interest only finance option as well as a form of monetary assistance to companies that employ the Initial Public Offers as a major business strategy.
