Go Raise Venture

VENTURE CAPITAL

” You are almost better off making your business better than your pitch better”

According to you what is venture capital?

It is the capital invested in a project in which there is a substantial element of risk, typically a new or expanding business. It is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long term growth potential. Venture Capital generally comes from well-off investors, investment banks and any other financial institutions.

Venture capital first started in the United States around the time of World War II. Before then, wealthy families such as Warburgs, Vanderbilts etc were the most  popular investors in emerging companies. The first- ever venture capital firm, the American Research and Development Corporation (ARDC), was created in 1946, unique in providing funding from other sources apart from wealthy families.

There are the five stages in venture capital financing, and they include:

• Speed stage
• Startup stage
• First stage 
• Expansion stage
• Bridge stage

Speed stage

At this stage, the company is only an idea for a product or service, and the entrepreneur must convince the venture capitalist that their idea is a viable investment opportunity.

Startup Stage

The startup stage requires a significant cash infusion to help in advertising and marketing of new products or services to new customers.

First Stage

The company is now ready to go into actual manufacturing and sales, and this requires a higher amount of capital than the previous stages.

Expansion Stage

The business has already started selling its products or services and needs additional capital to support the demand.

Bridge Stage

The bridge stage represents the transition to a public company. The business has reached maturity, and it requires financing to support acquisitions, mergers and IPOs.

There are various deciding factors which contribute to the decision of whether a company should go ahead with venture funding or not.

Advantages Of Venture Capital

Opportunity for expansion of the company-

Venture capital provides the company with an opportunity to expand. This would not require collateral and there is an obligation to repay the loan.

Valuable Guidance And Experience-

Besides capital financing, venture capital is also a source of valuable guidance, expertise and consultation.

A member from the venture capital firm is usually appointed to the board of the start up company.

Helpful In Building Networks And Connections

Venture capitalists have a huge network of connections in the business community. These connections could be advantageous for the start ups to grow and become successful.

Easy To Locate-

It is very easy to find and locate VC within minutes, investors, as they are documented in various directories.

This reduces the time, efforts and money involved in searching venture funding.

Disadvantages Of Venture Capital

Dilution Of Ownership And Control

Venture capitalist provides huge capital to the start ups in return for a stake in the equity of company. If the start up succeeds, then it helps them earn tremendous amount of profit.

VC’s Take A Long Time To Decide

Venture Capital funfing involves a huge amount of risk. So, VC’s usually takes lots of time to decide whether they want to undertake investment or not.

” Raising Venture is the easiest thing a startup founder is ever going to do”