Learn What Venture Capital Can Do For You
The process of an investor buying part of a company, usually one just starting up, is called venture capital. These people put their money in a high risk company which should also have high growth. These types of investments are generally anywhere from five to seven years long. The investor will look for a return on their money by the company being sold or from offering to sell to the public shares in the company.
When a venture capitalist does invest in a company, they might want a percentage of the company’s equity, and might want to also have a position on the board of directors. All investors who put venture capital in a company are looking for some sort of good return on their investment. They can say that they want repayment from the sale of the company itself, ask for their money back or renegotiate the original deal.
You’ll also find that there are three different kinds of venture capital investment. The first is early stage financing, which has first stage financing, start-up financing and seed financing. First stage finance is for companies who want to expand their capital to continue with a full scale and to enter the arena of public business. Seed financing is a small portion of venture capital, given to someone who is trying to begin a business, such as an entrepreneur. This can be used for various things such as developing a business plan, market research or to build up their management team. Start-up financing is when the venture capital which is given to a business that has been around for under a year. Their product won’t have gone commercial yet but they will just be starting to do this.
Next you’ll find expansion financing. It includes second and third stage financing plus bridge financing. Second stage is an investment that’s meant to expand a company which is already stable. It will have growing accounts and inventories plus be trading already, but it is possibly not making a profit yet. Third stage financing is for companies which are becoming profitable or are breaking even. The venture capital here is used to expand the business and the money could be used for to buy real estate or more product development. Bridge financing has several different meanings. It is an interest only, short term investment that can be used for restructuring a company. It can also be used to liquidate an investor’s position and sell their stock.
In acquisition financing the investing will be used to get a percentage or even a whole of a different company. The venture capital here is also used by a management group when they are buying out a line of products or a business, no matter the stage of their development. It can be a public company or a private company.
