Reminder: What is Venture Capital?

We talk a lot about venture capital on this blog; how to attract it for your business, how to increase yields from business you invest in, etc. But to those who might be new to this blog and/or the idea of venture capital this article is designed to get your mind wrapped around just what exactly venture capital means. In a nutshell venture capital is money that has been invested into a start up company that can not get money the traditional way such as getting a loan from a bank or a company that might potentially be failing and plans to restructure using the raised money. The idea of venture capital is one of high risk for high reward.

By: BMA Editorial Team A

Business needs money to grow and thrive but their business plan is not always understood by traditional banking who is not keen on risk and has criteria that isn’t generally conducive to building a better business. That’s where venture capital can help. But what is venture capital?

Venture capital keeps business booming! It is a way that new business can get start up capital and begin to thrive and it’s a way that established business could expand. That’s because venture capitalists are looking for new and innovative ventures that have the potential to have huge yields. They are not interested as much in businesses that are already flourishing they are interested in expansions that have a risk attached to them and to restructuring. Think of them sort of like a risk junkie that needs a fix.

Venture capital is money that a venture capitalist puts forward to a business venture in return for having a stake in the company. Venture capital is not a loan. Venture capitalists invest in hopes that there will be a big yield in the future that will make them a whole lot of money. That means whatever the future profits are the venture capitalist will share in it.

There is no question that venture capital is risky but it is also the main source of funding for start up companies that have few other sources they can rely on. It’s a well known fact that those with ideas have no money and those with money are often lacking ideas so venture capital is a great way to marry up the two in a way that benefits both parties.

When venture capitalists look for venture capital investments they look for a company that is small and new with a very promising future. In this way they can bring very little cash to the table and have the chance of making millions if all goes well. Although venture capitalists take big risks the gains can also be enormous.

Venture capitalists have their own team that spends their time watching what’s happening in the business front. They watch for companies that are struggling and very vulnerable but have extreme growth potential. Other capitalists will enlist the services of a private equity firm, or something similar, which has the job of matching up entrepreneur with venture capitalist.

Having an idea and a business plan is what entrepreneurs do. They are also a breed of individuals that are willing to take risk, and they are willing to lose everything, because they are confident their idea is sound and will make them money. Thankfully the venture capitalists couldn’t be bothered to come up with their own idea of what to do with their money instead leaving the ideas to you while they become the investor.

Now that you know what venture capital it, do you think it is right for your new business? Do seriously consider it, because venture capital is a way to catapult your business into an entirely different dimension…

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Entrepreneurship Wiki

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