Venture capital is a means of financing for startup companies with high growth potential.
Just like most companies when they are starting out, startups do not meet the requirements set by finance institutions for granting loans although they may have excellent business ideas. The beginning of their business would be impossible without venture capital funds. The main difference between venture capital and private equity is the age of the company. Venture capital funds invest in startup companies and companies that are in the process of becoming established and which are not necessarily profitable, but have a strong growth potential due to the nature of their business. Meanwhile, private equity funds invest in business that are already established. More about private equity here.
Venture capital investments are beneficial to companies for a number of reasons. It is probably the only way to gain the financial capability to achieve the company’s goals. Depending on the nature of the company, production is strengthened, sales operations and marketing are improved, new products are developed or created and additions to the company’s team are provided if needed.
Venture capital funds take a portion of the shares of the company, usually, in cooperation with other investments or funds. Startup businesses usually receive financing in stages: A, B, C. This means that financing is provided to a business as it grows gradually.
Venture capital funds provide not only the necessary funding to companies, but also business experience, skills and contacts that help develop and grow the business.
Startup / young company
Financial and knowledge injection of venture capital
Realizing the potential and competitiveness in the market