| Venture Capital As A Source Of Funding For Small Business |
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| Written by Wade Henderson |
| Sunday, 19 July 2009 14:38 |
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Venture capital consists of having professional investors take minority or temporary shares of the capital of start-up or recently opened businesses.
Venture capital consists of having professional investors take minority or temporary shares of the capital of start-up or recently opened businesses. This greatly improves the financing of firms with high growth potential by creating favorable conditions for the granting of bank loans. Indeed, the capital of investors is a tremendous leverage to gain access to bank financing. When a company receives Venture capital, the owners are able to get advice from the investors and sometimes even use their contacts in the industry. Is Venture capital and capital investment the same thing or are they different? Venture capital includes all operations that involve buying shares of unlisted companies. These equity investments, usually minority, are performed by specialized professionals whose main aim is to achieve substantial gains in a relatively short time, usually between 4 and 5 years. There are capital investments that help business in their different stages of development: creation, development and crisis. Some venture capital is invested only in special sectors, or sectors that are dedicated to perform or investigate selected areas. For examples, companies that do work on biotechnology, or information technology. Venture capital is invested almost exclusively in new promising companies. Their processes, services or product are different from those offered by other companies and would likely be successful. A venture capitalist can give an investment of more than 300,000 euros. Angel investors may contribute with share of 5,000 to 150,000 euros. In general, there is not a specific amount that dictates the capital investment. There are different kinds of capital investments. One of them is the Seed Capital where the intervention happens before or just after the actual start-up of the business, or during the stage of developing a new product prototype, pre-series, etc. This investment necessarily requires the establishment of the legal business. There is also Creation or Start-up capital where the intervention happens when a new company is on its first development. Also referred to as post-creation capital. All of these are examples of venture capital investments. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done. IMMFinancial.com project financing finance project Get a totally unique version of this article from our article submission service |