Essay Example on In general venture capital comes from well off investors








In general venture capital comes from well off investors other financial institutions or investment banks but its not necessary for it to be in monetary form it can be provided in managerial expertise or technical form Investing in ventures can be risky but the above average returns are an attractive pay off for investors Becoming popular these days especially if the business or a firm does not have access to capital markets bank loans or any other debt instruments present in the market Another key aspect of venture capital is that the investors put up their funds usually get a say in the company Focusing on the term venture capital it is like large ownership chunks of a company are created and sold to few investors through independent limited partnerships created by venture capital firms Venture capital focuses on the companies that are developing and looking for significant amount of funds for the first time It is different from private equity as they tend to provide funds mainly to well established and larger companies Another term associated with the venture capital is angel investors The capital or funds provided as the venture capital are given by high net worth individuals called the angel investors National venture capital association comprises of hundreds of venture capital firms that offer funds to various ventures small businesses or to innovative enterprises

Many times angel investors are the entrepreneurs themselves or they tend to be often executives retired recently from business empires they ve built General key characteristics of self made investors are that they look to invest in companies that are well managed have a fully settled business plan Certain investors mostly invest or offer their funds to businesses that are involved in similar industrial or business sectors with they are familiar or have know how of Another common feature of angel investing is co investing where one angel investor provides funds alongside a trusted associate or partner mostly another angel investor A generalised venture capital process can be regarded to have the following steps The first step for the venture of start up firm that is looking out venture capital funds is to submit a business plan to the venture capital firm or the angel investor who is interested in funding or capitalising his money The interested investor or the venture capital firm if interested should investigate and perform the due diligence of the companies model products management and plans Most of the venture capitalists or you can say angel investors have a prior experience in as equity research analysts or some might have Masters in Business Administration MBA degrees

Usually the investors of the venture capital focus in a specific industry After the completion of the due diligence process the investor pledges the investment of capital against the equity in the company The venture may be provided as a lump sum amount all at once but mostly it is in rounds or chunks The venture capital firm or the investor then after providing the funds might take active role in the funded company directing and supervising the progress and development before releasing the rest of the funds The venture capitalist or the angel investor exits the company after a certain period usually which is five to six years after the initial investment Now having a closer look at the venture capitalist A person or the firm who either gives the capital to start up ventures or those who support small companies that wish to expand but do not have excess to capital to meet their demands is the venture capitalist Venture capitalist are ready to invest in these firms because they hope to earn an enormous and massive amount of return on their investments in these companies if these companies are successful These kinds of investors also experience great amount of losses if their choice fails but these are generally wealthy enough that they can afford such kind of risks associated with funding these small businesses or start up ventures which apparently have an impressive idea and an efficient management team Venture capitalists mainly search for a strong management team a large capable market and a different and unique type of product or service that has a very strong competitive advantage They also look for the prospects in industrial sectors they are familiar with also an opportunity to own a sizeable percentage of the firm they are investing in to also have a say or influence in its direction Looking at the brief history that how venture capital investment started First venture capital firms started in the United States of America the mid to early 1900s Georges Doriot a Frenchman who moved to the U S to get a business degree and ended up staying to teach at Harvard's business school and work at an investment bank would go on to found what would be the first publicly owned venture capital firm American Research and Development Corporation or ARDC What made ARDC extraordinary was that for the first time it was an organisation that brought money from places other than exclusively wealthy families In the U S wealthy families like the Rockefellers or Vanderbilt s were the ones to fund start ups or provide capital for growth for the first time ARDC s had millions in its account from educational institutions and insurers Firms like Morgan Holland Ventures and Greylock Ventures were founded by ARDC alums and still other firms like J H Whitney Company popped up around the mid 20th century Venture Capital began to look like the industry it is known as today after the Investment Act of 1958 was passed The act made it so small commercial investment companies could be licensed by the Small Business Association that had been established five years earlier by then President Eisenhower Those licenses were capable to provide private equity fund and gave them access to low cost government guaranteed funds to make investments in small businesses

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