Venture capital is a type of private equity financing that is provided to those companies that are starting out on their business operations. The beneficiaries of venture capital services also find it difficult to generate capital by issuing debt financing instruments.
On Venture Capital
Venture capital may be described as the money that is provided by investors to businesses that are starting to assist them in their business operations. Venture capital can also be called a type of private equity capital.
The venture capital services are provided on a professional basis. The companies that provide venture capital services do so in exchange of the ownership of a certain percentage of the company.
It has been observed that, normally, the investors who provide venture capital services are economically well off.
Venture capital services may also be provided by financial institutions like investment banks for example.
Popularity of Venture Capital
Venture capital is a viable option for generation of funds and is a widely availed option by the organizations that are new in the business circuit.
These companies generally find it hard to generate money by issuing debt financing instruments. The entities that deal in providing venture capital services also prefer this form of equity capital as it is financially rewarding. They also receive the opportunity to participate in the business activities of a company.
The investors who deal in putting money in new business enterprises are known as venture capitalists. The venture capitalists operate on a professional basis and could be regarded as being one of the primary sources of equity financing.
Venture Capital Fund
The venture capital fund is basically an investment pool where third-party investors put their money for investing in companies that may not receive bank loans or finance from the conventional money markets as a result of the amount of risk involved with them. The venture capital funds may also be limited partnerships.