Who Can Receive Venture Capital?
Venture capital concerns the intervention of professionals in the share of small and recently constituted businesses. Their shares help the company develop their operations for a specific period of time.
This greatly improves the financing of firms with high growth potential by creating favorable conditions for the granting of bank loans. Indeed, the capital of investors is a tremendous leverage to gain access to bank financing.
It also allows entrepreneurs to take advantage of advice from these investors, their experience, their address book, etc. It is not uncommon that investors hold a seat on the board of directors with a significant weight in making decisions.
Is Venture capital and capital investment the same thing or are they different?
Venture capital includes all operations that involve buying shares of unlisted companies. These equity investments, usually minority, are performed by specialized professionals whose main aim is to achieve substantial gains in a relatively short time, usually between 4 and 5 years.
There are capital investments that help business in their different stages of development: creation, development and crisis.
Some venture capital is invested only in special sectors, or sectors that are dedicated to perform or investigate selected areas. For examples, companies that do work on biotechnology, or information technology.
Venture capital is invested almost exclusively in new promising companies. Their processes, services or product are different from those offered by other companies and would likely be successful.
The typical investments of capital are higher than 300,000 euros. However, this does not mean that there are not venture capitalists who invest less. There are angel investors who may invest amounts from as low as 5,000 to 150,000 euros combined with other investors.
There are different kinds of capital investments. One of them is the Seed Capital where the intervention happens before or just after the actual start-up of the business, or during the stage of developing a new product prototype, pre-series, etc. This investment necessarily requires the establishment of the legal business.
Another example of capital investment is that given to companies that are already past the first stages. This is commonly referred to post-creation capital.
The term “venture capital” concerns only the first two types of intervention.
Tags: Capital Investment, Seed Capital, Buying Shares, Different Stages