What is Venture Capital?
And How Can it Help Your Business?
capital is a means of financing fast-growing private companies. Finance may be
required for the start-up, development/expansion or purchase of a company via a
mechanism such as in a management buyout.
businesses always require capital. There are a number of different ways to fund
growth. These include the owner's own capital, arranging debt finance or
seeking an equity partner, as is the case with venture capital.
venture capital, the venture capitalist acquires an agreed proportion of the
equity of the company in return for the requisite funding. Equity finance
offers the significant advantage of having no interest charges. It is patient
capital that seeks a return through long-term capital gain rather than
immediate and regular interest payments.
capital investors are exposed, therefore, to the risk of the company failing.
As a result the venture capitalist must look to invest in companies that have
the ability to grow very successfully and give higher-than-average returns to
compensate for the risk.
venture capitalists invest in a business they become part-owners and typically
require a seat on the company's board of directors. They tend to take a
minority share in the company and usually do not take day-to-day control.
Rather, professional venture capitalists act as mentors and aim to provide
support and advice on a range of management and technical issues to assist the
company to develop its full potential.
in the US consistently rate the management support as the most important
contribution of a venture capital firm. There are many sources of capital, but
only a venture capitalist can provide experienced management input gained by
helping many other companies successfully conquer the inevitable problems and