Is the question of control a reasonable concern when it comes to the participation of a venture capitalist?
In fact, many owners are concerned about this topic when considering venture capital investments. It is only natural that a business owner will feel insecure that the participation in venture capital will entitle it with more power. However, venture capitalists have no interest in becoming managers.
The reason is the fact that most venture capital providors will invest in more than one company at a time. Being a manager of all of them is an impossible task. A venture capitalist will have some participation but its opinion is not heavier than that of the manager, though they have access to the company’s financial documents.
A venture capitalist has many investments and will have participation in more than one company. It should not be a matter of concern. Even though some companies may look more promising than other, a venture capitalist prefers to hold profit from all of them rather than just the most profitable one.
An experienced venture capital investor will know that the profitability of its investments is not guaranteed and that he or she should cover all bases to be able to see better results.
And even if the venture capitalist would leave the ship before it sinks, it is expected to sell its shares. But if the company is not doing well, it will find no purchaser at the price originally expected. It is therefore obliged to wait for it to go better.
When the owner has enough funds, he or she can opt to buy the shares from the investor. There is a possibility that the prices of the shares have gone up beyond what the owner can afford.
Three options are available to the owner in that case: the stock exchange for larger businesses, the arrival of a new venture capitalist or the acquisition by another group. In last two cases, the situation is not temporary and the company finally goes into outside hands. The sense of dispossession is total if the new shareholder holds more than 50% of the capital.
Wade Henderson – recognized Professional – 15 yrs in the Business Finance Field – strong reputation for getting the deal done. IMMFinancial.com venture capital funding – venture capital companies