Venture capitalist is a private company that provides capital to other companies, in exchange for equity shares in the company. They give money to companies so that their companies grow and get good returns on their investment. In some companies, risk is also high, but they still invest their money because they have to take risk, that’s why they are called venture capitalists.
Many small companies do not have startup capital to start a business, so only venture capitalists help them by providing capital. Risk is involved in their work but if they don’t take the risk then how will they earn money on money. There is risk in all companies but there is also success with risk, “higher the risk, higher the profit or success”. To the same venture capitalist, while investing, one must definitely see how much risk is there, but to invest in risk, it is also good to get returns. Instead of venture capitalist investment, they become shareholders in other companies. Many chances of failure are with companies that are new and fail to prove anything.
A venture capitalist is like a limited partnership that invest their money, so they too have many rights in the company such as:
- They have right to make investment decisions
- They have right to get share of profits
- They have right to know about company’s risk, circumstances
- They have the right to control management.
It’s not that venture capital is only a company, it can be a person who invests money for getting the best return and wants to become a shareholder in a reputed company. Companies look for a professional venture capital who are rich. Venture capitalists earn high rate of return than investment. They have a qualified team who obtains investment capital from insurance companies, pension funds, financial investors and then make a decision about in which business to invest in.
Role of venture capitalist
Venture capitalist investments are in the form of equity financing. They provide money in exchange to get an equity position in the company and these equity financing is used by those businesses who are unable to receive debt financing ( loans from banks or other financial institutions) and can’t fulfill their conditions. By providing funds to the company, venture capitalists get a majority in companies who have the right to voting, making decisions, control on management, and share in profits. Even venture capitalists have the right to give some suggestions, ideas for a company’s high potential growth.
How to approach venture capitalists?
A good businessman has a right to investigate and approach the venture capitalist according to company’s requirements. There are some points where business owners will get to know how to approach venture capitalists.
- Make a proper list of all investors who work as a venture capitalist.
- Choose an investor that meets your company’s requirement.
- Then check the financial background of that investor whether he can invest in your company or not.
- Spend some time with that investor to know about their conditions or requirements from the company.
- How much capital he can invest and get to know position of venture capital market
Setting up a business is not a small task, so a good businessman is the one who sees all the things, choosing the best investor who helps and provides financial support in your business. So always choose an investor who is financially strong.