You know the difference between venture capital, private equity and debt capital?

Have you ever seen the words "venture capital or private equity?" Well, if you start a business, you need to know what types of investors have to ask, and the difference between venture capital, private equity, debt capital, as investors and categorized. You also need to know on what conditions, different forms of capital is distributed budding entrepreneurs.

Debt Capital

What is debt? Well, do you think of debt financinga loan from a bank, you have to pay back with interest. In reality, this is exactly what debt. Many entrepreneurs often resort to get some outside financing to start their businesses. Liabilities, depending on its size, can be obtained from your regular bank or if there is a large sum of money, you may need a special bank's known as the investment bank. As far as the investor who offers the debt is concerned, debt financing is a much lower risk investmentscompared to equity. This is because debt financing is that the vehicle is up to you, such as if you take out a loan for a car or a mortgage on your house.

What is the interest rate for borrowing? In most cases, when they invested in investor borrowing in order to expect a prospective companies that it at least ten percent of the sum that was invested in a particular company. Moreover, debt financing is usually the entrepreneurs who believe the investor is, is given mostprobably believes that paying off the debt in a reasonable time.

Equity Capital

Equity, partly because, unlike other debt, you do not have to pay back to the investor. The equity is the financing that grows virtually every company profits as a company. Equity is typically made of a particular fund invests and is classified as "Private Equity and Venture Capital.

Private Equity and Venture Capital

Basically, private equityis an equity fund that belongs to either privately run institutions or private individuals. Usually private equity investing by institutional investors, the people who are specialized in private equity investment by such institutions. Institutional investors usually managed to work for a private equity or PE firms, private equity. Venture capital is private equity is maintained, but a little different from private equity. Venture capital is really private equity, which normallyreserved for investments in companies that achieve a high growth.

For those of you who are funding and the need to not have to worry about debt would you want to have some kind of equity, either private equity or venture capital. This funding is much better than debt, because in contrast to debt, you do not have to pay back to investors. Instead of shares, an investor makes money when a company out of cash. This usually means that if a companyis bought by another company or for public distribution, that is when equity firms prepared their money. The other side of the coin, however, is a much riskier equity investments for the investor as debt, since launch, with equity, an investor makes money only with a buyout, IPO or IPO or an exit strategy.

Investors

As already mentioned, there are several investors and institutions to invest. Some investors are wealthyPeople who invest their own money to entrepreneurs, they want while others work for institutions such as private equity investing and venture capital firms and institutional money from their funds.

Angel Investors

Angel investors are wealthy individuals who invest their money in to a particular contractor for any reason. Some angel investors to invest in a particular company because they particularly liked or that entrepreneurs also feel charitable and want toTo get shares in their own entrepreneurial experiences with other budding entrepreneurs on their feet. Other angels may invest in a business because a particular company could fit into values that angel investors, ethics, or other personal interests. If you have a relatively wealthy and he invested in your company simply because he wants to help a member of his family, he is also an angel investor.

Venture capitalists and institutional investors

In contrast to "angel investors, ventureCapitalists and institutional investors will not invest their own money. Institutional investors typically work for a private equity investment companies and equity funds, which are usually part of a pension fund or other types of funds. Venture capitalists are investors in venture capital investors and workers only for venture capital firms.

Where does the money come from?

Well, that's a good question. In the case of the most successful private equity and venture capital firms, theMoney for investments by venture funds is that these companies have raised. If a successful venture capital or private equity firms with their investments, they are able to raise new funds for future investments. Again, as before, cash equity investors in their investment when a company either bought by another company, and so-called liquidated

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What makes you eligible for venture capital?

A budding company or a financial crisis facing great solution for all its financial hurdles with Venture Capital to be found. Unlike banks, venture capital firms an important source of long-term growth of capital.

Venture capital firms and individuals are interested in many of the same factors that influence bankers in the analysis of loan applications from smaller companies. Although the banks are looking in the immediate future, a small company, they are most influenced by the past.Venture capitalists look at the long term future of the company. Banks are creditors in venture firms are owners. Hold shares of the company by their invested capital to its equity base. Therefore, they examine existing or proposed products or services and the potential markets for them with extreme caution. They invest only in companies they believe can rapidly increase sales and generate significant profits. Venture capitalists more closely at the characteristics of the product and the sizeof the market as commercial banks.

Venture capitalists invest in long-term capital growth and not for interest income. You are looking for three to five times their investment in five or seven years. The role of venture capitalists venture projects is to do with this potential increase in value of investments which are not successfully find.

It is difficult to predict early on the productivity of enterprises. So, set strict guidelines for these VCs ventureProposed size, duration of the search for companies, requirements and procedures to reduce risks, because their investments are protected in the event of failure.

Most venture capital investment companies' interest is a solid company with projects proposed limited operating history. The profits of these companies are made not given much precedence over any investment decision is made. Firms that take on a new product line or are expanding a new market with additional fundsparticularly interesting. The venture capitalists provide funding, in order to grow those businesses in a sprint rather than gradually, as it did on retained earnings. There are a number of "start up" companies, the financial assistance from venture firms get. Venture capitalists see that investment analysis and capital source studies are planned, 5 years. The investment analysis should compare the return on product, market, process, or investments, while theSource to compare alternatives, the cost and availability of debt and equity and the expected level of net income, which together support the selected investment. This source of analysis and studies should be prepared so that you quarterly financial consequences of changes in the company's strategy is to anticipate.

But a structured financial planning can not guarantee that you will be able to obtain capital from a venture capital firm. Not so that it is almost certain that youreceived no favorable consideration from venture capitalists.

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Do you really need venture capital?

Yes, to a pot of money that simplifies life and remove a number of complications, however, that the right short-term goal? The amount of time you spend on the search for venture capital to better use out together with the customer, building a product, how the revenue and get your business closer to your next big milestone productive.

I say this because I have had two different experiences. My first involved spending more than two years in search of hard VCCash, real people who would have ignored the business and support continued. End result - death due to business plan writing, and the search for a better evaluation.

My second experience involved building a business from scratch with no VC funding at all. In the same amount of time that the first one was not supported, the other 12 employees and a positive cash flow from the 6th Month. Today the company is big $ 260,000 sales in a country where the averagePer capita income of less than $ 800 per year. Yes, it is small, but it is ours.

If you run a small profitable business or you want a run and not the sharing kind, venture capital is not good for your plans for the future. Venture capital is expensive, risky debt with a very high searched terms. The conditions make sense if you are already well-established long-standing credibility, important milestones have taken quickly to grow inorganically to a certain size, change the world in a short period and areno matter who finishes with the business that you built with your hands.

If I had money I need at a glance what you want to achieve, I carry, and if not subject to the four above-mentioned conditions, if I can find some way there without VC funding. It is a slow, painful way, but atleast I am getting somewhere.

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