Venture Capital: The Basics
 
Venture Capital: The Basics

A lot us have ideas, but the real challenge is making them a reality. There are a lot of opportunities in the business industry but the real challenge is making out. Earning money is as difficult as finding. No one really want to be a cubicle drone but without any capital most of us become regular employees.

There are ways to start a business. If you have a great idea that has a big potential, there are ways to access funds for your business. Venture capital funds are one of the sources of seed capital for your start up company.

Venture capitalists invest on start up companies with big potential and high growth. These are usually high technology companies that may lead returns in the long run. The downside of this is the venture capitalists get a share of your company and have say on the company's decisions. A person who has always dreamt of becoming their own business may find this a tad uncomfortable.

The low down on Venture capital

There are some venture capitalists that provide financial services to start up companies. These are usually companies that are entirely new, with mostly an idea and a business plan in their hands. Venture capitalists are willing to make risky investments on businesses that banks loans and capital markets are afraid to make.

Companies that they invest in are usually high technology business such as computer and electronics. They are also interested in development and research.

Venture capitalists are general partners that offer limited partnership to a company. These general partners are usually made up of executives from a financial firm. They have the ability to pool in a large amount of capital. These funds are usually taken from pension, foundations, insurance companies, financial endowments and financial institutions.

This may seem a very good idea for a starting company but there is downside to this. In the business world nothing is free and general partners require 20% of the net profit of the company. They also need a 2% management fee every year.

It's also not easy to attract venture capitalists. They often have strict requirements. They will no invest on companies that don't have proof of their technology. They may agree to meet up with you but that does not mean you're already in good terms. Most of time 999 business plans get rejected out of 1000. They can reject you for a lot of things that may even seem trivial at the moment. The hurdles don't stop there.

General partners may help your company to jumpstart and expand. But they won't just let you make the decisions when they have invested a lot of money on your company.

In some instances this may lead to problems especially when general partners only care about making money for themselves. They may invest in advertising but not in the right places for your customers. Some of them like to spend too much money and the sudden growth is too fast.


Before you find yourself a venture capitalist make sure you are aware of their impact in your company. A venture capital fund may seem convenient at that time but you should always look ten steps ahead. Look for a general partner that will help your company grow not just add weight to their wallets.

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Articles
Finding Angel Venture Capital in Honolulu

Pitfalls to Avoid in Applying for a Venture Capital

Astellas Venture Capital: Aim Big

Venture Capital: The Basics

Venture Capital - Knowing Your Funding Options

Venture Capital and Its Characteristics

What the Definition of Venture Capital Won't Tell You

Advantage in New Orleans: capital for the Underdogs

Making a Difference with Non-Profit Venture Capital

Venture Capital and Grants - Is It Right For Your Business?

What You Need to Apply for a Venture Capital

Choosing the Best Venture Capital Consultant

What is a Venture Capital Course?

The Advantages of Taking Venture Capital Courses

Venture Capital Cycle - How Does it Go?

Venture Capital Firms in New York: Chase Your Dreams

Kinds of Venture Capital Firms and What They Do

Venture Capital Fund: A Viable Risk?

How to Raise Venture Capital Funding

How and Where to Find Venture Capital Insurance

Kinds of Venture Capital Jobs

Sources of Venture Capital News

Venture Capital - Things that You Should Know

What do Venture Capitalists Want?

What is Venture Capital Fund?

 

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