The Imperial Finance

     Venture capital has helped to fuel the growth of most of the world’s biggest public companies at one stage in their life-cycle. Venture capitalists are willing to run the risk of making poor returns, or losing all of their money, for a chance to hit a home run. That’s also why venture capital tends to follow big ideas, and is hard to get it when you’re looking to do something that isn’t too disruptive or innovative.

     The Dynamics of Venture Capital Funds

     When entrepreneurs are looking to raise money from venture capitalists, they often have a poor understanding of how the market works, according to a 2002 report by Financial Director. Venture capital firms do not raise their funds from shareholders; they usually raise their funds from private institutions. They will then charge a management fee, and take a percentage of equity for themselves. Venture capital firms also have a tendency to work together – often they will have other firms invest in a deal along with them. This can be to limit their exposure, and bring in expertise from other firms. Some venture capital firms will take an active role in managing their investments, while others prefer not to.

     Don’t Be Too Scared Of Equity Dilution Read the rest of this entry »

     During primitive stage, the venture capitalists keenly notices the merits and demerits of the company, based on this, they invest a small amount signing a long term relationship. This is called ‘early stage investing’. Later, they show their active participation by increasing the amount of investment based upon the profit. This is known as ‘expansion stage financing’. Usually, they tie up in parallel with multiple venture capital firms, thus acquiring multiple funds in the same time. The capitalist maintains the contract throughout the company in his later stage investing and provides a big support in the growth of the company.

     Structure of the Investment:
     There is a fixed duration for the investment and it last from seven to ten years. The venture capitalist has the fixed duration signed up with the company called ‘call down’. The early stage investment takes five years to get complete whereas the later stage investment requires a period less than the previous one. Therefore the investment cannot be short term in case of venture capital.

     General Types of Investors
     Venture investors are usually generalists who invest in public sector companies and industries which may be spread out in various geographic locations. It does not matter whether the invested companies are in their starting stages or in the developed stages. Read the rest of this entry »