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The Venture Capital Industry

Jan - 29 - 2014

Venture capital is an important term to know if you are planning on investing in a company's growth, or if you're a company who is looking for investors to help you grow. The venture capital industry is all about establishing relationships between investors and companies: investors provide the funds necessary for growth and expansion, and companies use those funds to do their growing and expanding, and re-pay the investors with shares and/or monthly (or quarterly or annual) payments.

Venture capitalists often work in groups in order to raise the funds necessary to invest in a portfolio of corporations - either corporations that are already established and in need of funds, or up and coming startups that may be high-risk, but have a potentially very high pay-off. In terms of dollars, venture funds usually start in the millions, but may go up to several billion. The money is pooled together from a variety of sources: government and college endowments, other corporations and institutions, and even from pension funds and other private sources.

Buying a stake in a venture capitalist opportunity means receiving partial ownership of the company in return for providing funds in the form of cash - the company uses those funds for growth, expansion, or simply to save themselves from bankruptcy. Most venture capitalists prefer to own stocks in the companies they invest in, since stocks mean partial ownership as well as guaranteed return of investment (ROI). Venture capitalists may also become a part of the company's board of directors, which is helpful in terms of providing financial assistance and general guidance to a struggling company.

Venture capitalists and corporations and even entrepreneurs work well together (especially when aided by financial experts such as Wes Edens Fortress): venture capitalists are high net worth individuals in their own right, but together they are able to amass several million or even hundreds of millions of dollars for investment purposes. Companies are hungry for access to this type of funding, since the funds do not have any strings attached in terms of how they are spent. It's only once a venture capitalist claims partial ownership in a company in the form of a seat amongst the other directors of the board that dictations and specific restrictions can be set into place.

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