VENTURE CAPITAL
Venture capital is a type of private equity capital which is generally provided to the businesses having great potential. It is also called as a risk capital. It is an investment that is basically provided by third-party investors. Venture capital is most attractive for new companies with limited operating history and who can not secure a bank loan or complete a debt offering. Venture capital comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms. Venture capital firms are typically structured as partnerships and the partners serve as managers as well as investment advisors of the firm.
A venture capital fund refers to a pooled investment that primarily invests the financial capital of third-party investors in enterprises with poor operating history. Most venture capital funds have a fixed life of 10 years, with the possibility of a few years of extensions to allow for private companies still seeking liquidity. The investing cycle for most funds is generally three to five years, after which the focus is managing and making follow-on investments in an existing portfolio.
Within the venture capital industry, the general partners and other investment professionals of the venture capital firm are often referred to as venture capitalists. Venture capitalists are expected to bring managerial and technical expertise as well as capital to their investments. Venture capitalists are paid through a combination of management fees and carried interest.
Although this kind of investment would be very advantageous for entrepreneurs that cannot find funding through regular means, some people still avoid venture capital due to the fact that venture capital investors usually have the power to intervene and run the company itself aside from being part owners of the company. So, if you want to start your own business and you have a good potential but you are not having sufficient funds with you as a startup capital, then venture capital will be the good option for you. Just be aware of all the risk factors involved in it.