Venture Capital:Yes and Yes
Venture capital is a term in the business world that many new startups become acquainted to in time. The idea of venture capital for a new business can be viewed in two ways: very good or OK. Venture capital is considered financial funds that are provided to a business in exchange for a share of that business. Depending on the risk of the business, the share of the business can range from minors percentages to higher end numbers. The funds are provided usually by a group of people or investors. They can either be known to the startup or unknown depending on their public image.
Some may view venture capital as a loan but there are differences between a bank loan and venture capital. With a normal bank loan, the business owner receives money in exchange for a promise that he or she will pay back the loan with interest at a given time period. With venture capital there is really no hard stated time limit. The investors may even lose their money in the business should things fail. With a loan, the bank will get something out of the deal.
The funds these venture capitalists provides usually are utilized to help start off a new business idea. Monies for marketing, networking, product development, and employee compensation are usually the big consumers of the offered money. Startups can really benefit from venture capital as they do not have the means to acquire some mass amounts of money to present their ideas and products to the market. It takes a lot of money and time to do this, and startups have usually neither. This is a clear advantage of obtaining venture capital. Another advantage is the fact that many investors have connections with media figures as well as individuals on the stock exchange. Investors with such connections could even help the new business land a position on the stock market, something a normal startup may not be able to achieve on their own.
Of course with any type of business there are disadvantages. The main disadvantage of venture capital is that the investors will have a say in the business as they will own parts of the business.
Unlike loans from a bank, the venture capitalists do have a say in the business and the business proceedings and can force the original owners to reconsider ideas and even the hiring and firing of employees. The founder may not wish to have the business directed towards a specific goal and many original owners may develop animosity towards the investors as they may begin to view their business as not theirs anymore.
Some may view venture capital as a loan but there are differences between a bank loan and venture capital. With a normal bank loan, the business owner receives money in exchange for a promise that he or she will pay back the loan with interest at a given time period. With venture capital there is really no hard stated time limit. The investors may even lose their money in the business should things fail. With a loan, the bank will get something out of the deal.
The funds these venture capitalists provides usually are utilized to help start off a new business idea. Monies for marketing, networking, product development, and employee compensation are usually the big consumers of the offered money. Startups can really benefit from venture capital as they do not have the means to acquire some mass amounts of money to present their ideas and products to the market. It takes a lot of money and time to do this, and startups have usually neither. This is a clear advantage of obtaining venture capital. Another advantage is the fact that many investors have connections with media figures as well as individuals on the stock exchange. Investors with such connections could even help the new business land a position on the stock market, something a normal startup may not be able to achieve on their own.
Of course with any type of business there are disadvantages. The main disadvantage of venture capital is that the investors will have a say in the business as they will own parts of the business.
Unlike loans from a bank, the venture capitalists do have a say in the business and the business proceedings and can force the original owners to reconsider ideas and even the hiring and firing of employees. The founder may not wish to have the business directed towards a specific goal and many original owners may develop animosity towards the investors as they may begin to view their business as not theirs anymore.
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