Question

What Is Venture Capital Financing? Describe venture capital financing. Discuss the pros and cons. Discuss and provide examples.

Answer 1

Venture capital is one of the way to obtain funding for Entreprenuers and comes as a higher stage after Angel investors. It is a subset of private equity for financing new startups and small business that has huge potential to grow. A group of investors, financial institutions, investment bank et can take the role of Venture capitalis(VC). VC gets attracted by high growth potential companies or companies that has proven their business model and in the growth phase. Typically the fund they offer will be many times higher than the present capital of the company and in exchange they demand shares of the companies.

Pros;

• Huge funding from VC which allows the company to pursue their goals without any hassle
• Growth can be attained quickly compared to a scenario where the funding is not present
• The startups are not fully liable to pay back the money of VC
• Best source for companies who are riskier to get bank loans

Cons:

• A major portion of ownership or equity has to be given to VC in exchange of the funds
• Some VC demand control over decisions which can disrupt the business model or vision of the owner.