FINANCIAL VENTURE

HOW DOES THEY WORK AND THEIR SUPPORT TO SMALL

BUSSINESSES

D
What is a Venture Capital (VC) ?
• Venture capital (VC) is a form of private
equity and a type of financing that investors
provide to startup companies and small
businesses that are believed to have long-
term growth potential. Venture capital
generally comes from well-off investors,
investment banks, and any other financial
institutions. Venture capital doesn't always
have to be money. In fact, it often comes as
technical or managerial expertise. VC is
typically allocated to small companies with
exceptional growth potential or to those that
grow quickly and appear poised to continue
to expand.
ESSENTIAL FINDINGS :
• Venture capital is a term used to describe financing that is provided to
companies and entrepreneurs.

• Venture capitalists can provide backing through capital financing,

technological expertise, and/or managerial experience.

• VC can be provided at different stages of their evolution, although it often

involves early and seed round funding.

• Venture capital funds manage pooled investments in high-growth

opportunities in startups and other early-stage firms and are typically only
open to accredited investors.

• Venture capital evolved from a niche activity at the end of the Second World
War into a sophisticated industry with multiple players that play an important
HOW DOES (VC) WORKS?
As noted above, VC provides financing to
startups and small companies that
investors believe have great growth
potential. Financing typically comes in
the form of private equity (PE) and may
also come as some form of expertise,
such as technical or managerial
experience.

VC deals generally involve the creation of

large ownership chunks of a company,
which are sold to a few investors through
independent limited partnerships. These
relationships are established by venture
capital firms and may consist of a pool of
several similar enterprises.
DIFFERENCE BETWEEN A (VC) AND PRIVATE EQUITY :
• One important difference
between venture capital and
other private equity deals,
however, is that venture
capital tends to focus on
emerging companies
seeking substantial funds for
the first time, while PE tends
to fund larger, more
established companies that
are seeking an equity
infusion or a chance for
company founders to
transfer some of their
ownership stakes.
 ADVANTAGES AND DISADVANTAGES:
PROS:
• Provides early-stage companies
with capital to bootstrap
operations
• Companies don't need cash flow
or assets to secure VC funding
• VC-backed mentoring and
networking services help new
companies secure talent and
growth
CORNS:
• Demand a large share of company
equity.
• Companies may find themselves
losing creative control as investors
demand immediate returns.
• VCs may pressure companies to
exit investments rather than
pursue long-term growth
HISTORY OF VENTURE CAPITAL:
• Venture capital is a subset of private equity. While the roots of PE can be
traced back to the 19th century, VC only developed as an industry after
the Second World War.

• Harvard Business School professor Georges Doriot is generally

considered the "Father of Venture Capital." He started the American
Research and Development Corporation in 1946 and raised a $3.58
million fund to invest in companies that commercialized technologies
developed during WWII.

• The corporation's first investment was in a company that had ambitions

to use x-ray technology for cancer treatment. The $200,000 that Doriot
invested turned into $1.8 million when the company went public in 1955.