Consequences Of Venture Capital

— Often, venture capital firms preserve an appropriate percentage of their funds to participate in follow-on fund raisings

Venture Capital is a specific term that refers to funding obtained from a venture capitalist. These are professional serial investors and may be individuals or part of a firm. Often venture capitalists have a niche based on business type and or size and or stage of growth. They are likely to see a lot of proposals in front of them (sometimes hundreds a month), be interested in a few, and invest in even fewer. Around 1-3% of all deals put to a venture capitalist get funded. So, with the numbers that low, you need to be clearly impressive.

Burrill, G. Steven, and Craig T. Norback. The Arthur Young Guide to Raising Venture Capital.

My experiences at the Demo Day solidified my fascination in the ecosystem of startups and venture capital. Unlike software where objects are definite and fulfill specific conditions, entrepreneurship represents an exciting uncertainty where success can be defined in myriad ways. However, due to the inherently uncertain nature of startups, a recurring theme among the startups I met was the need for funding to convert their dreams into realities. As the Demo Day ended, I determined that although creating a startup would be exhilarating, I want to become a venture capital investor. I decided that these innovators shouldn’t have to be concerned with funding and that becoming a venture capital investor would allow me to remove their limitations and join them on their paths to success.

The first option is to obtain funding from an angel investor group. Halo Capital Group is an Indianapolis based organization that provides capital growth, capital investment and seed funding to startup organizations. “Halo invests in the range of $300k to $750k and may syndicate with other groups” (Mass Investor, Inc., 2015). Along with the funding, Halo provides support, advice and a wealth of knowledge to aid in the firm’s success. The group meets every other month to consider and select two new startups.

The advantage of venture capital is that it provides money to help your business set up and establish itself.

Using an external source may be a quick way for business to receive a large sum of money however most of these come with high interest rates causing issues if businesses cannot keep up with instalments.

One of the major setbacks to getting capital for a new business venture is the

Since I have estimated that I will need $1,000,000 to finance my business I have to now think of how I am going to raise this capital, the different ways to raise capital, would fall under two categories – equity and debt financing. I will begin to sell ownership shares of my business by approaching investors, I already have a friend who has informed me that she would be interested in my venture and would be willing to invest $100,000 in my business, I have my family too that has pledged to help me financially. I can ask them to become equity investors in my business; I could offer them a share in the ownership of my business. Depending on the success of my company I could agree to issue dividends to them too. Various governments also give out loans to new businesses, called small business loans to encourage new

Venture Capitalists are a company or wealthy individual who is prepared to invest in a young or new business . Obtaining Venture Capitalist finance can be highly beneficial to a small business as it may be able to acquire a large amount of capital, of which would not have been possible through other methods of finance, such as a bank loan . Venture Capitalist investment is further financially viable as a business is not obligated to repay the investment it receives. This method of finance is based upon the investor’s decision to take a risk on a business in anticipation of its success. In addition to its financial beneficence, acquiring this form of capital can provide a small or new business with valuable business expertise, as investors are able to provide key advice and guidance as well as industry connections. Making better decisions can be vitally important for a business’ growth .

Competitiveness does not just depend on the cost of factors of production, or on a specific technological advantage. Rather, it depends on continuous innovation, high-level skills and learning, an efficient communications and transport infrastructure, and a supportive enabling environment. Each of these aspects is discussed below in greater detail.

Venture Capital is one of the fastest emerging sources of finance for new entrepreneurs. In spite of its increasing popularity, funding via Venture Capital is faced with a number of difficulties. Thus, it is important to study the various aspects of raising funds through Venture Capital.

Financing options could include an angel investor. In this domain, the entrepreneur receives funding through an independent resource who defines the terms and affords alternative repayment plans (Mikic et al., 2016). The angel investor can involve a leading individual within a mainstream corporation or independent person of wealth (Kuratko, 2014). The distinction is that this individual has the fiscal resources available to diversify and invest into

There is a current lack of money supply in the marketplace to finance legitimate growing organizations. This is highly acute for small businesses that are in early stages of development as VCs continue to nurture existing investor portfolio companies rather than take new bets on early stage firms. Big commercial institutions like banks, ventures capital firms or even record labels in the music industry have significantly reduced their risk profile for new investments. In this environment VCs have the upper hand and entrepreneurs clamour to get their attention. The need for more than family, friends, angel investors and traditional VCs to fund a company is forcing entrepreneurs to make an “open call” for funding. Crowdfunding provides an alternative to traditional venture capital gatekeepers and presents a marketing platform upon which to raise funds, drive interest in the product, service or issue and get input and feedback to company direction. Like any new fad unscrupulous individuals

investors exist for larger amounts of capital such as VC funds and banks, entrepreneurial initiatives that require much smaller amounts to start with need to rely on friends and family or own savings. They then also make extensive use of bootstrapping techniques to mitigate their financial constraints, by boosting their short-term profits.