Venture capital Definition, Meaning, Features, Method of financing, Importance

Venture capital Definition, Meaning, Features, Method of financing, Importance

1. Start up companies with a potential to grow need a certain amount of investment. Wealthy investors like to invest their capital in such businesses with a long-term growth perspective. This capital is known as venture capital and the investors are called venture capitalists . Definition of venture capital

2. Venture capital is financing that investors provide to  startup  companies and small businesses that are believed to have  long-term growth  potential. Venture capital generally comes from well-off investors,  investment banks  and any other financial institutions. However, it does not always take just a monetary form; it can be provided in the form of technical or managerial expertise. Meaning For venture capital

3. Features of venture capital

4. It is basically financing of new company which are finding it d ifficult to go to the capital market at their early stage of existence. This finance can also be a loan-based or in convertible debentures so that they carry a fixed yield for the providers of venture capital Those who provides venture capital aim at capital gain due to the success achived by the borrowing concern.

5. Venture capital is always a long-term investment and made in companies which have high growth potential. The provision of venture capital will bring rapid growth for the business. The venture capital provider will also take part in the business of borrowing concern where by, the venture capital financier not merely confines to finance, but also provides managerial skills.

6. Not all the capitalist will experience high risk. But venture capital financing contains risks. But the risk is compensated with higher return. Not much of technologies are involved in venture capital, it involves financing mainly small and medium size firms, which are in the early stages. With the assistance of venture capital, these firms w ill establish and later can go in for traditional finance.

7. Method of financing by venture capital institutions

8. Importance of venture capital

9. Promoting Entrepreneurs: Just as a scientist brings out his laboratory findings to reality and makes it commercially successful, similarly, an entrepreneur converts his technical know-how to a commercially viable project with the assistance of venture capital institutions. Promoting products: New products with modern technology became commercially feasible mainly due to the financial assistance of venture capital institution.

10. Encouraging customers: The financial institutions provide venture capital to their customers not as a mere financial assistance but more as a package seal which includes assistance in management, marketing, technical and others. Bringing out latent talent: While finding entrepreneurs, the venture capital institution give more thrust to potential talent of the borrowing concern.

11. Promotion of exports: The venture capital institution encourage export oriented units because of which is more foreign exchange earnings of the country catalyst: A venture capital institution acts more as a catalyst in improving the financial and managerial talents of the borrowings concerns will ne more keen to become self dependent and will take necessary measures to repay the loan.

12. More employment opportunities: By promoting entrepreneurship, venture capital institution are encouraging self employment and this will motivate more educates unemployed to take up new ventures which have not been attempted so far. Financial viability: Through their assistance, the venture capital institution not only improve the borrowing concerns but create a situation whereby they can raise their own capital market. In the process they strengthen the capital market also.

13. Technological growth: Modern technology will be put to use in the country when financial institutions encourage business ventures with new technology. Sick companies : Many sick companies are able to turn around after getting proper nursing from the venture capital institution.