Venture Capital Advantages & Disadvantages

WHAT IS VENTURE CAPITAL MARKET?

Venture capital is a source of financing that investors provide to the startups and early age companies, that will have long term growth potential. Venture capital basically comes from big investors, investment banks or financial institutions. Sometimes, startups or early age companies do not get financial support, they also get technical or managerial expertise.

TYPES OF VENTURE CAPITAL FINANCING

  • Seed money

Seed money means the amount an entrepreneur needs to start his business. Seed money is used by entrepreneurs to make his ideas into reality.

  • Start-up:

Startup money is the amount that a startup company needs to market their products or services. This amount basically works to develop the products and services.

  • Initial-Round

Initial- Round funds help the startup to manufacture their products or provide their services in Large scale.

  • Second-Round

Second-round is the capital for those startups that are selling the products and not getting the profit out of it.

  • Third-Round

Third-Round financing source helps to grow newly beneficial structure.

  • Fourth-Round

it is also known as bridge financing and the proposed for public process financing.

SOURCES OF VENTURE CAPITAL FINANCING

  •  Personal investment

When you are going to start your business, you should be the first investor of your own. it should be cash or your own assets. This provides faith to the investor that how much believe you have on your idea.

  • Love money

love money is the money you get from your family, friends or relatives. A business relationship should not be taken lightly with family or friends. They are people who believe in your ideas after you.

  • Angels

Angel is the wealthy individual who directly invests in small companies. Angel is the first person in the corporate world, who invest in the company. Angel helps the startups to boost their ideas into reality.

  • Business incubators

Business incubators help the startups to provide the non-financial things i.e, office space, marketing etc.

  • Government

Startups help the economy to grow and provide taxes to the government. That is why the government has started many programs for startups, they can get funds for their ideas.

VENTURE CAPITAL ADVANTAGES & DISADVANTAGES 

  • ADVANTAGES

  •  Venture capital brings funds and expertise to the company.
  •  it provides Large sum of equity finance.
  • The company does not obligate to repay the money.
  • it provides valuable information, resources, technical assistance.
  • DISADVANTAGES

  • Founders or Executives Loss their control.
  • it is a lengthy process, it takes time to get funds.
  • The company loses decision making power.
  • Venture capital helps the company in long term, not in short term.

VENTURE CAPITAL PROCESS IN ENTREPRENEURSHIP

  • Idea generation
  • Start-up
  • Ramp up
  • Exit

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