Venture Capital – Obtaining Seed Capital For Your Start-Up Business
Venture capital is the expression given to an investment made by private investors for the purpose of acquiring and developing a new enterprise. Venture capital is provided mainly by venture capital companies or private funds and is usually used for early stage, startup, or emerging businesses that have proven to have very high potential for growth or that have shown impressive growth in the past. Venture capital thus refers to a group of funds, probably originating from wealthy individual investors, who pool their money together in the hope of making a substantial return on their investment. These ventures then seek venture capital investors to provide them with the funds they need in order to further their development as well as their marketing. The venture capital firm will therefore acquire a certain amount of shares of the company’s stock in return for this capital. Venture capitalists have a keen interest in the success of the company in terms of its management and profitability.
Venture Capitalists prefers to fund early-stage companies whose management and potential for success are not yet established. They therefore want to focus on these types of businesses because they will yield higher dividends per share and will require less initial outlay. The larger the number of shareholders in a venture capital firm, the greater will be their ability to exercise control. As a rule, the bigger the share of the company’s stock held by the venture capitalists, the more influence they have over the management companies they fund. Venture capitalists may also invest in a company if it has strong business plans that can attract future investors and they expect a high rate of return.
To meet the needs of both the prospective investors and the venture capitalists, small business investment companies (SBIs) were developed. Small business investment companies are basically angel groups. The objective of these companies is to provide venture capitalists with ready cash to assist in the start-up of new ventures. The funding amounts provided to such companies are generally a percentage of the equity value of the company. The size and number of investors in the company play a crucial role in determining the amount that the company receives in financing.
Most private equity transactions are facilitated through intermediates such as VC firms. VC firms have direct investments in a company and facilitate the funding and matching of the appropriate type of investor. An important function of the VC is to act as a liaison between the venture capital investor and the company’s management. In order for a private equity firm to provide the right type of investor, they must have a deep understanding of the company and the industry in which it operates. They are also capable of providing the kind of leadership necessary in a growing sector.
Small businesses that need seed money typically turn to national venture capital association (NDC) groups for assistance. Because most small businesses are not publicly traded, they are not registered with the U.S. stock exchanges. However, most NDCs are supported by venture capital funds that originate their investments through smaller, regional firms in their region.
There are several accredited programs at your local business school that can help you obtain financing for your start-up. The Dorsiot School of Management has a program known as Dorsiot School of Entrepreneurship, which is supported by several national and regional venture capital firms. A certificate program called Business Angels also facilitates funding for young entrepreneurs through the support of several well-known venture capitalists.
