An Overview on Venture Capital

Ruggieri Vitalba^*
*Correspondence: Ruggieri Vitalba, Department of Economics, University of Calabria, Rende CS, Italy, Email:

Opinion

Venture Capital (VC) is a type of private equity fund granted by venture capital firms or funds to start-ups, early-stage, and rising enterprises that have shown high growth (in terms of number of workers, yearly revenue, and scope of operations). Venture capital firms or funds invest in these early-stage enterprises in return for equity, or a portion of the company. Venture capitalists take on the risks of investing in high-risk start-ups in the hopes of seeing some of their investments succeed. VC investments have a high failure rate because start-ups face a lot of risk. The start-ups are mainly from high-tech areas like Information Technology (IT), clean technology, or biotechnology, and they are usually founded on an innovative technology or business strategy.

Long-term money is not Venture Capital (VC).

The objective is to invest in a company's balance sheet and infrastructure until it achieves a size and credibility that allows it to be sold to a corporation or provided liquidity via institutional public-equity markets. In essence, a venture capitalist invests in an entrepreneur's concept, develops it for a certain time, and then exits with the aid of an investment banker. Venture Capital (VC) is a type of private equity in technical terms. The basic difference is that, whereas private equity investors seek solid businesses, venture capitalists typically invest in startups. Small businesses with tremendous growth potential typically receive venture financing. Types of Venture Capital (VC) funding The many kinds of venture capital are divided according to how they are used at different phases of a company's life cycle. Early stage funding, growth financing, and acquisition/buyout financing are the three main forms of venture capital. The venture capital financing process is completed in six steps, each of which corresponds to different stages of a company's development.

Seed money: Low level financing for proving and fructifying a new idea.

Start-up: Funding is required for new businesses to cover marketing and product development costs.

First-round: Manufacturing and early sales funding.

Second-round: Operational money provided to early-stage businesses that are selling products but are not profitable.

Third-round: Often known as Mezzanine financing, is money used to expand a newly profitable business.

Fourth-round: Also known as bridge financing, the fourth round is recommended to fund the "going public" process.

Features of Venture Capital (VC) investments

Investing in Venture Capital (VC) has certain characteristics:

• High Risk

• Lack of liquidity

• Long-term perspective

• Equity participation and capital gains

• Venture capitalists are involved in the management of the firm

Advantages of Venture Capital (VC)

• They contribute to the organisation a wealth of knowledge and experience.

• A large amount of equity capital can be offered.

No repayment of funds.

• It gives essential knowledge, resources and technical expertise in addition to funding to help a firm succeed.

Disadvantages of Venture Capital (VC)

• The founder's autonomy and authority are lost when the investors become part owners.

• It's a time-consuming and complex process.

• It is a risky method of funding, and the benefits from it can only be recognized over time.

The reason for investment is to capably create returns for restricted accomplices by financing advancement and serving business visionaries. Investment is regularly used to subsidize private ventures and new companies during their beginning phases. These organizations regularly battle to get subsidizing through customary means, so they look towards investors as an alternative. Venture capital is financing that is put resources into new companies and private ventures that are generally high danger, yet additionally have the potential for dramatic development. The objective of a funding speculation is an extremely exceptional yield for the investment firm, generally as a securing of the startup or an IPO (Initial Public Offering) [1-5].

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