Why Venture Capital Funding?
Venture capital funding is a kind of private equity capital in general provided by outside investors to finance new projects or businesses. Although high risk, they present the prospective for above-average returns. So why venture capital funding? Let us take a look at the many advantages of venture capital funding in this article.
When you decide to establish a small company or business, one of the first important questions you would likely have is how to raise money to fund your business operations. One will need to spend some time developing a business plan. Once you have a well prepared prospectus for your investors and explained the risks to them, you can go ahead with the venture capital funding of your business.
Besides providing the capital that a company needs to develop its business, there are other benefits of venture capital funding, as it also offers a number of value added services. Here are some of the reasons to why go for venture capital funding:
Willing to take risks: The venture capitalists are generally prepared to take high levels of risks in return for high potential profits when financing start-ups.
Management – Besides finances, the start up companies also get strategic, operational and financial advice form these capitalists who become personally involved with the strategic direction of the company
Alliances – another of venture capital funding benefits is that the capitalists can introduce the company to a widespread network of strategic partners both domestically and internationally.
Facilitate exit - Venture capitalists have experience in the procedure of preparing a company for an initial public offering of its shares, thus facilitating a trade sale.
No collateral payments- The Venture capital funding does not require collateral nor charge interest payments, which is one of the main advantages of venture capital funding.
Value Addition - The nurturing by Venture capitalists helps in value addition for any
start-up’s success, as intelligent direction, strategic partnerships and flexibility is critical for their sustenance and growth.
The above mentioned points are the basic good reasons for venture capital funding.