Venture capital
VC is a fund that is available for investment in an
enterprise which offers the probability of profit along with the possibility of
loss its also called risk capital term venture capital comprises two words (
venture and capital )
Venture is a course of proceeding associated with risk whose outcome is
uncertain the word capital here means the financial resource to start an
enterprise .In other words the venture capital is the capital available for
ventures associated with new technology ,production or process involving
considerable amount risk
VC is financing the investor who provide fund to a start up
company and small business that are believed to have long term growth potential
its also mean financing a expansion of company that have already demonstrated
their business potential but do not yet have access to the funding source
Features of
venture capital
- · Venture capital is usually in the form of an equity participation it may also take the form of convertible debt or long term loan
- · Venture capital is a investment not liquid A venture capitalist cannot realise his money on demand no repayment way the hole investment is loss if the enterprise is unsuccessful
- · In VC investment are made in the enterprise using new technology to produce new product in order to gain more profit
- · VC join the enterprise as co promoter or as a partner in a project and share the risk and reward
- · In Venture capital is for high risk but high growth potential project
- · The venture reach full potential the venture capitalist disinvest his holding either to the promoters or in the market the basic objective of investment is not profit but capital appreciation at the time of disinvestment
- · Venture capital is for the new idea new technology and not for the enterprise who are engage in booking trading and agency work
- · Venture capital is funding the small and medial level company who is need of fund for there project
Venture
capital stage
VC may take various form at different stages of the project
there are four stage of development of a project development of project idea Implementation of
the idea Commercial production and marketing and finally large scale investment
to exploit the economic of scale and achieve stability
Financial institute only finance the project only in the
third stage or second stage but rarely from the first stage
(2)
Implementation stage : when the firm is set a
began working on the project it is the stage where the work begin its also
called work stage ( product service )
offered in the stage it is a working stage after the acquirer of finance
(3)
Fledging stage : in the third stage the firm is
in production stage and actively in manufacturing product the third stage is marketing and
distribution stage getting additional
finance and having proper marketing infrastructure
(4)
Establishment stage : it is where the firm is
established in the market and to expand in this stage it is where the project
is successful and the firm is making profit in this stage .At the end of the
establishment stage the firm Is listed on the stock exchange and at this point
the venture capital disinvest there
shareholding through available exit routes
Venture
capital fund
VCF is a business entity whose principal commercial activity
is to make investment in the highly risk oriented company whith an expectation
of earning high returns in the form of capital gains the venture capital fund
may be in the form of a trust
Venture capital
fund contributes financial capital to new and young enterprise in exchange of
substantial equity position in the enterprise ( it take five to eight year for
the assisted firm to gain maturity in commercial functioning ) the equity value
appreciates and the equity holding of the VCF are liquidated in the market to
generate returns
Venture capital is
difference from capital and finance though these three forms of financial
assistace seem to ne the same they are different from one
another seed capital is the finance provided to technocrats or entrepreneurs to
meet the promoters contribution for setting up of manufacturing activity (VCF
are mostly 10 year of fixed life )
venture capital firm >> venture capital fund
the money the firm invest comes form a variety of sources private ,public source those who invest in the VC are limited partners
