Venture capital is a fund raised by a group of wealthy
investors, which is then made available to small companies and
startup firms. These small businesses and potential
entrepreneurs usually have excellent growth potential but lack
the funds to proceed. Because there's a chance that the business
may not do well at all, venture capital is also known as risk
capital.
So how does venture capital work? It's not as difficult as it
sounds. A start up business will solicit funds from a venture
capital firm. If everything goes well, the venture capital firm
will invest a certain amount of money into the start up, drawing
on it's capital over several years. When the fledgling firm
"exits," (meaning the business is purchased or goes public), the
investment is returned to the venture capital firm's investors,
with a percentage of the profits thrown in for good measure.
How does one find a venture capital firm? One way is through a
trusted financial expert such as an attorney, financial advisor,
stockbroker or accountant. With luck, one of these professionals
will recommend you and your business to a venture capital firm.
Be sure to do your research first. The library and Internet host
a wealth of information and there are many books available on
the subject. You'll need to know what steps are necessary to put
in place before seeking out venture capital. For instance, a
business plan and executive summary are necessary in order to
convince any venture capitalist to invest in your idea.
A typical venture capital firm may invest in perhaps one out of
four hundred businesses that are seeking their assistance. After
losing money in the dot com boom of the nineties, many firms
have become quite selective. If you wish for one of these firms
to make an investment in you, you must be convincing and have
great negotiation skills. Your business or product may be
fabulous, but if you don't have the ability to sell it, it's not
going to bring in any investors.
About the author:
James Hunt has spent 15 years as a professional writer and
researcher covering stories that cover a whole spectrum of
interest. Read more at
www.venture-capital-
guide.info
