Venture capital is the money that is provided to seed early-stage, emerging
growth companies. Venture capital funds invest in companies in exchange
for equity in the companies they invest in, which usually have a novel
technology or business model in high technology industries, such as
biotechnology and Information Technology (IT). It is one of the most
important parts of a business. EXIN Consultancy brings for you the basic
information that you needed to know about Venture Capital.
Venture capital is also a way in which the private and public
sectors can construct an institution that systematically creates networks for
the new firms and industries, so that they can progress. This institution helps
identify and combine business functions such as finance, technical expertise,
marketing know-how and business models. Once integrated, these enterprises
succeed by becoming nodes in the search networks for designing and building
products in their domain.
A venture may be defined as a project prospective converted
into a process with an adequate assumed risk and investment. A venture
capitalist is a person who makes venture investments, and these venture
capitalists are expected to bring managerial and technical expertise as well as
capital to their investments.
A core skill within venture capitalist is the ability to
identify novel or disruptive technologies that have the potential to generate
high commercial returns at an early stage. By definition, venture capitalists
also take a role in managing entrepreneurial companies at an early stage, thus
adding skills as well as capital, thereby differentiating venture capitalist
from buy-out private equity, which typically invests in companies with proven
revenue, and thereby potentially realizing much higher rates of returns.
Inherent in realizing abnormally high rates of returns is the risk of losing
all of one’s investment in a given startup company. As a consequence, most
venture capital investments are done in a pool format, where several investors
combine their investments into one large fund that invests in many different
startup companies. By investing in the pool format, the investors are spreading
out their risk to many different investments instead of taking the chance of
putting all of their money in one start up firm.
India is fast catching up with the West in the field of
venture capital and a number of venture capital funds have a presence in the
country.
