Venture Capital

Venture Capital funding is an investment made in companies in exchange for an equity position (stock).  Typically, venture capital funding is appropriate for companies that are geared for dynamic growth or expansion.  Venture capital funding sources provide capital, and in exchange, become financials partners with the growing company for an agreed upon period of time, usually 3-5 years.

What Are the Benefits of Venture Capital Financing?

Venture capital funding helps small companies grow and develop without the traditional, asset-based restrictions imposed by mainstream lending sources.  Collateral issues are less important than the individuals who will be involved in the project.  Commercial banks manage only a minor percentage of the total funds used in venture capital financing.  The bulk of the funds come from private financial companies, organizations, and individuals.

How Do Businesses Use it?

Growth and capitalization go hand in hand.  A business may have a completive position in the market, but be unable to take advantage of that position because of the lack of resources to develop, manufacture, and market their product.  Businesses mature and grow in different stages.  Each stage of growth is an opportunity for a growing business to take advantage of venture capital financing.  Businesses use venture capital to fund everything from an idea to a full-blown production operation.

How Does It Compare to Other Financing Methods?

Traditional funding is based on shareholder equity – a percentage of the amount of liquid assets.  Traditional funding, as a rule, is not available to the entrepreneur who can grow his business but, lacks a solid asset base as funding collateral.  Venture capital funding is remarkable, in that it is a funding program where the funder actually becomes part owner in the company.  The venture capital funder usually, through a Preferred Stock Plan, becomes a stockholder and may or may not have a voting position on the company's board of directors.  There are venture deals that include the ability of the investors to have a say in some of the day-to-day management decisions.

Want know more about Venture Capital Financing and how it can turn project frustrations into a promising future for your  business?