9/21/2017

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Venture Capital

Venture Capital is money and resources that are provided by investors as a source of capital for privately held companies that are already established or those that are in the developmental stages, but with the potential for long term, prosperous, growth.

Sometimes referred to as risk capital, it is a very important source of funding that help companies get started, or to expand, by investing in them and supplying them with an infusion of cash.

Providing venture capital is a high risk undertaking for the investors, but it can generate a high rate of return, especially if the company that the money is invested in becomes successful.

Most of the risk to venture capital takes place during periods of economic recession. Profits are the highest during times of mild to high inflation.

There are different types of venture capital. Some is given as start up or seed money, and some venture capital is used in second or third stage financing, bridge financing, or leverage buyout financing.

For a company that needs money for growth and expansion, venture capital can be more appealing than regular bank loans, although venture capital can be much more expensive, sometimes with interest returns going to the investors that amount to 20% or more.

Venture capitalists often seek an equity position in the company and a share of the ownership, thereby exerting influence over financial matters and garnering a position in the decision making process within the company.

Most venture capitalists are usually wealthy investors, banking institutions, or groups of individuals who form venture capital partnerships while pooling their resources.

They often look to invest in high tech, state of the art science and medical research businesses, as well as cutting edge electronic and computer related industries.

What venture capitalist look for in a company is the potential for fast, solid, growth. They also look to the future for potential takeovers by larger, more influential companies, thus making their investments more profitable.

But they don't limit their capital to any one field. Venture capital may be given to any company that has the potential of making large profits, and most venture capitalists do their homework before investing in any particular company.

 

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