Tuesday, December 6, 2011

Venture Capital Investment

By Lary Brown


The difference they both possess mainly applies to the structure and goals of the business. These upcoming companies that have a fresh product or service to offer are highly risky due to lack of experience in their chosen industry. The financial growth of these companies is the reason why a venture capitalist would want to invest in them. The investors are not involved in the everyday transactions of the venture but are monitoring how the business is progressing. Not unless the business life has come to end, the investment is usually not yet returned to the investor which is on several occasions through a preferred stock.

Private equity tends to purchase companies from different type of industries and almost always buys 100% of a company in a leveraged buyout. Only a marginal amount is invested by investors through venture capital to businesses that offers novelty products or services. The partners should have access to a number of venture capitalists in order for them to gain exposure. The business owners should prepare a detailed feasibility report on the Technical, Financial, Managerial, Marketing and Socio-economic stating the characteristics of the service or product.

Both are not only used to supply money for companies but also receive revenue from them;hence,both have financial advantages.On most occasions, the business owners who run the new venture are the reason why an investor would want to put in money for the company. In addition to that, making a bond or relationship with capital investors are a vital component for the business owners.

Private Equity on the other hand concentrates on few companies but would shell out a much larger investment size and thus choosing mature companies that are more lucrative and less likely to fail. A thought out review of the report from the business owner is done to ensure it reliability. Following the preliminary evaluation is to make a well made approval report and an analysis for the risk and benefits of the new venture. The new business must obtain the customer's needs and wants with regards to the product or service they are selling.

Capitalists tend to not put their eggs in just one basket and hope to get a big return on some of the investments that would payoff the loss from other investments. An official union is made between the capitalist and the business owners to ensure their duties and responsibilities. The last process of venture capital investment would be monitoring the project and on some occasions make post investment support to the new business. This would ensure the continuity of the project to build its momentum to greater heights.




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