Venture Capital

Venture Capital or VC is a potential form of gaining the capital needed to start or grow a business. Financing is very important to the success of a business. Of course, not every business opts for this financing option as it comes with its own set of pros and cons. Let's take a look at what Venture Capital financing is and what it could mean for your business.

In short, venture capital is a way of raising funds for a company in exchange for equity in the company. In other words, if you provide money to help the company grow or expand, you get a share of the equity in the company.

Venture Capital funding is great for small business because it is very versatile. It can be raised for all types of business, both technology and non-tech businesses. Basically, if you have a company someone may be interested in gaining equity in, chances are you could fund raise through VC.

Venture capital fund raising is typically provided through venture capital funds. This means that the people financing these types of "loans" are in the business of doing so. A venture capitalist is someone who invests their money in businesses to help them grow, and builds their own fortune as they go by gaining equity stakes in each of the companies they help finance.

Venture capitalist often invest across stages - from the early stage seed venture, to later stage financing. With each stage the equity changes.

As a small business it is worth noting that venture capital is a great option, and in many cases an important source of equity for start-up companies. Not only does it provide you with the capital needed to grow, this is not money that has to be paid back, which allows you to free up some future capital to keep cash flow. Additionally because the venture capitalist only profit from their investment if you succeed, they can a vested interest in you doing so.
Venture Capital financing does not necessarily come cheap. While it is not your traditional loan, venture capitalists usually require a high rate of return on their investment (20%+ per annum). Of course this depends a lot on the financer.

In addition to all that is said above, it is good to note that this is not for small or short-term loans. Venture Capital financing is typically going to range from half a million to several million dollars. Thus, it is not the kind of loan you get to stay afloat while you wait for your accounts receivable to be collected on.

There is any number of ways to secure financing, some easier than others. Understand the options available to you, as well as what they mean, the terms, interest rates, and risks as well as rewards can help your business make a financing choice that is the best fit for your company goals.