What is Venture Capital

Venture capital is an important source of financing for start-ups and other companies that have a limited operating history and have no access to capital markets. A venture capital firm (VC) provides generally lead to new and small businesses with a perceived long-term growth potential that a large payout to investors.

Who is a Venture Capitalist?

Venture capitalist is not necessarily only a rich financier. Most VCs are limited partnershipsthat a fund of pooled investment capital, which have invested in a number of companies. They vary in size from companies with only a few million dollars investment in the much larger VCs that may have invested billions of dollars in companies around the world to manage. VCs may be a small group of investors or an affiliate or subsidiary of a large commercial bank, investment bank or insurance company that makes investments on behalf of clients of the parent or outside investors. InIn any case, the VC should use their business knowledge, experience and know-how to finance and promote companies that yield a significant return on investment of the VC, usually within three to seven years.

Returns for investors:

Not all VC investments are paying off. The failure rate is indeed quite high, and in fact, anywhere from 20 to 90 percent of the portfolio company may not return on the investment of the VC. On the other hand, if a VC is doing well, a fundoffer yields from 300 to 1000 percent.

Partnership:

In addition to a proportion of the capital, expects a VC a say in its portfolio companies are active. Ideally, the VC promotes growth at the company through their participation in management, strategic planning and decisions. To achieve this, the VC on the expertise of the general partners who may be former CEOs, bankers, or experts in a particular industry. In most cases, one or more partners with unlimited liability ofVC Board of Directors to take positions in a portfolio company. You can also help recruitment of key executives to the portfolio company.

Size of support:

It is important to do your homework before approaching a VC to do for the funding to ensure that you target the right potential partner for your business needs. Not all VC investments in start-ups. "While some are able to invest small amounts of" seed "capital for very early ventures, many are focused on early and expansion financing, whilestill others are able to invest at the end of the business cycle, specializing in buyouts, turnarounds and capital increases.

Investment preferences:

VCs can be generalists, investing in a variety of industries and locations. More generally, they specialize in a particular industry. Make sure your business is goal of the VC industry before you make your pitch - a VC that is not focused on biotechnology start-ups consider the request for later seedfor the expansion of your semiconductor companies. Often, you can have a glimpse of a VC investment preferences by checking their website.

In addition to the preferences of industry, VCs typically have a geographic preference. In the same general location as one of the VC portfolio companies can be better with business operations such as marketing, support personnel, and funding.

Note that venture capital is not an option for all new businesses. In fact, VCs are very selective inElection of new companies to invest so that your company may not qualify. You are in the majority of companies with high growth potential interested that it successfully with a possible higher than the average return in a time frame of three to 10 years, exit, depending on the type of investment. Given the strict expectations is the most venture funding for companies in rapidly growing industries such as technology, biotechnology and life sciences.

This article is part of a completeVenture Capital 101 guide. To view the full Venture Capital 101, please visit the homepage of www.MyCapital.com.

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