Venture capital is the form of Financing where venture capitalists will invest funds in startups and starting stage companies which has potential to do good in future.Venture capitalists will invest in equity share of the companies.where it will be high right risk but with the analysis of them they will invest and analyse the good return in future. Venture capitalists will invest in well diversified and new product company which is producing new product which may have demand in the market. Venture capitalists will advice the management to take good decisions to make company successful.
Ways in which venture capitalists finance the company
- Venture capitalists may purchase equity share of company
- Investing in debentures of the company
- Giving the loan to the company
Stages of venture capital Financing
Seed stage: Here company just has the plan or the idea of the product but requires fund to bring that idea in to actual product and make the market research, demand forecasting.
Startup stage: Here company need fund to make the advertisement of the product, where the market research and demand analysis has already completed.
First stage: Here Business goes for actual production of products and bring it in to the market. For production need the fund.
Second stage: Here business go for the more and more production of products and bring new products for the market.
Bridge stage: Here Business already matured and ready for merger, aquision and go for ipo. So need fund for merger and ipo.
Exit strategy for venture capitalists
- Initial Public Offering
- Merging with other companies
- Acquired by other company
- Purchased by other venture capitalists
- purchased by company owner