METHODS OF FINANCE - Venture Capital (LONG TERM)
Venture capital - Investment from an established business into another business in return for a percentage. Typically invests in early stage, high risk businesses with potential for rapid growth and/or high returns.
Venture capitalists will normally look for a high rate of return in a specific time period.
The business or entrepreneur may also benefit from expertise and mentoring from the venture capitalist.
OFTEN ASSOCIATED WITH HIGH RISK START UPS
ADVANTAGES OF VENTURE CAPITAL
Venture capitalists will normally look for a high rate of return in a specific time period.
The business or entrepreneur may also benefit from expertise and mentoring from the venture capitalist.
OFTEN ASSOCIATED WITH HIGH RISK START UPS
ADVANTAGES OF VENTURE CAPITAL
- Potential for large sums of money for investment
- Expertise to help the business
- Makes it easier to attract other sources of finance
- Provides the required capital for expansion
- A long and complex process (venture capitalist hard to find)
- Expert financial projections are likely to be required
- Initially expensive for the firm e.g. legal and accounting fees
- Partial loss of ownership
- Risk of conflict or received interference
- Venture capitalists requires a high rate of return
- Investment often supported by a high level of bank debt in business.
- Not a long term investment - venture capitalist will aim to sell within 5-7 years
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