Venture Capital

Unlike a business loan that needs to be repaid, venture capital (VC) is made up of private funds from institutional investors and wealthy individuals looking for a large return on investment. Dedicated investment firms pool together these funds and offer it to young companies with a lot of growth potential in exchange for ownership shares and control over company decisions. VC’s make their return in the event of an Initial Public Offering or the trade sale of these companies.

Venture capital is a good source of funding for new companies that are too small to raise capital in the public markets and are too immature to secure a decent bank loan.

To see if venture capital would be a suitable financing option for your company, here are a few of its pros and cons:

Pros

  • You get relatively quick access to funding

  • Good for early-stage businesses

  • You can access large sums without worrying about repayment

  • Receive long term guidance from experienced management teams

Cons

  • There is a lot of competition among businesses for funding

  • You need to present an eye-catching and well thought out business plan

  • You will no longer be the sole owner of your company

  • You may ultimately lose control over the operations of your business.