What You Need to Know About Venture Capital
When a venture capitalist takes the decision of investing in a small company, he or she does so after carefully studying the business plan for a period of up to 3 years. Generally the offers that enter this process are those that are different and innovative with a high potential for success. Venture capital funds follow a different set of rules than those established by banks. For instance, a venture capitalist will give great importance to the documents presented, the experience and profile of the entrepreneur, the idea of the business and the product it will offer to the market, and of course its innovative qualities.
Venture capital is obtained after going through a complex process. Depending on the kind of venture capital we are talking about, the investor may choose to buy shares (ordinary or preferred), or agree to receive advances on their bank accounts.
Venture capital is not intended to remain indefinitely invested in the company. Its intervention should be ad hoc and limited in time. The output can be achieved by: reduction or amortization of capital, the repurchase of securities by original partners at an agreed price, the resale of securities to a financial or industrial group, and by the sale at a capital development.
The capital gains that the venture capitalists obtain come essentially from the sale value of the shares they bought. The risks they take are: never being able to sell the shares, or losing everything if the company disappears.
You may be wondering, who are these investors? Well, venture capital can be given by angel investors, venture capital companies, or venture capital funds that help small business that have innovative or different ideas.
We present you here a list of factors that venture capitalists will take into account when choosing a company:
For investors what the company does and how it does it is important. They will want to know whether the business produces, creates, develops or recovers.
Status of the capital investment: public, semi public or private. The criteria for entry to the capital of a company can vary depending on the nature of the company that owns the fund.
Minimum and maximum amount granted: there is no need to contact a speaker funds from 1million Euros while your need for investment is estimated at 200,000.
The areas of funding are particularly important to venture capitalists because some may look for specific areas: technology, innovation, etc. As well, as if coverage is requested for a small or large geographic area.