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Venture capitalists  

Venture capitalists

Author: EricBBigham , Last Modified, 2020-06-06 14:26:42

Category: business Keywords: Venture-capitalists

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Venture capitalists

Venture capitalists invest in businesses with the potential for high returns, those with products or services with a unique selling point, or competitive advantage. They invest in a portfolio where a significant number of businesses may fail, so those that succeed have to compensate for those losses. They also want proven track records, and so rarely invest at the start-up stage. Like angel investors, venture capitalists bring a wealth of experience to the business. They are unlikely to get involved in the day-to-day running of the business but will often help focus the business strategy.

Securing VC investment can be a complex, costly and time-consuming process. A detailed business plan is a must. And legal fees will be incurred through the deal negotiation, regardless of whether investment is ultimately secured.

Corporate venture capital (CVC) is another growing source of funding for small businesses. It describes a wide variety of equity investment undertaken by a corporation, or its investment entity, into a high-growth and high-potential, privately-held business. CVC performs the same economic role that private venture capital plays, the identification and nurturing of the innovative businesses of the future. This formal and direct relationship is usually three-fold: by making a financial investment in return for an equity stake in the business; by offering debt finance to fund growth activities for an agreed return; by offering non-financial support for an agreed return, such as providing access to established marketing or distribution channels, or knowledge transfer. It is important that the corporation's aims are aligned with those of the business.

Find out more through the BVCA (British Private Equity & Venture Capital Association), bvca.co.uk, as well as its dedicated website on venture capital - venturecentral.co.uk.

EricBBigham

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