Venture capital is a new form of financing that is a boon for young entrepreneurs and plays a strategic role in financing small-scale companies and high-tech and venture companies. In all developed and developing countries, it achieves its goals by providing equity capital, so they are more like equity partners than financiers who benefit from capital gains.
As young and growing companies need money at the right time, they must not only let their company float in the market, but also survive in the long run. When financial institutions such as banks and other private financial institutions are reluctant to take on the risk of early financing, as the credibility of emerging companies has not yet been established, venture capital firms begin to fund projects in the form of equity, which may be referred to as "high-risk capital". .
Despite the misconception that the interests of venture capital firms are primarily driven by cutting-edge technology in the industry, not all venture capital firms do. Venture capitalists link high risk to huge profits. Of course, after thoroughly analyzing the prospects and consequences of the project and the feasibility. Venture capitalists become partners in entrepreneurship. Real venture capital financing is not necessarily limited to high-end technology products. Any risk concept with great potential can be financed. Venture capital is a powerful mechanism to promote the institutionalization of entrepreneurship.
Mainly venture capital focuses on growth. A venture capitalist is very interested in seeing a small business grow into a bigger business. He helps build business, fund it and is committed to the company's growth. In the case of potential equity participation, venture capitalists can withdraw from the partnership after the company is profitable and recover their funds by selling stocks or convertible securities. If the company chooses to obtain long-term investment from venture capital financing, financiers must establish investment attitudes for a long time, such as five or ten years, in order to make the company profitable.
Another form of financing is the management of venture capitalists. He has become an active participant in the company's operations. His ideas have been simplified to how to multiply and make money quickly, which is a win-win situation for both parties. On both sides. Not only financial, venture capitalists also contribute to marketing, technology upgrades and management skills to benefit new companies.
The management methods of venture capitalists are very different from those of bankers. The latter's main focus is on collateral and securities in the form of assets. He puts his hands outside of management and stays safe. Venture capitalists cannot invest as much as stock market investors without knowing the company's business and management. He combines the qualities of bankers, stock market investors and entrepreneurs.
The latest trend is that popular and large software companies promote their content through emerging companies, providing the latest technology, training and expertise, in addition to financing, expanding the geographic area in which the parent company operates and expanding its territory to a greater height. Venture capital firms should focus on promoting growth and development, rather than simply limiting their interests to financial technology, infrastructure, and information technology services. They need to diversify their investments in various fields, and if the business has potential, they can even consider the revival of the disease unit as one of the options.
Orignal From: How is venture capital different from traditional financing?
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