Venture capital consists of having professional investors take minority or temporary shares of the capital of start-up or recently opened businesses.
This type of funding allows small companies to experience growth in their first years. The participation of venture capitalists allows small companies to be more attractive to financial institutions and improve the possibilities of getting bank loans.
When a company receives Venture capital, the owners are able to get advice from the investors and sometimes even use their contacts in the industry.
Is Venture capital and capital investment the same thing or are they different?
Venture capital is a type of private equity investment, where the investors buy minority shares from small rising companies that are not listed in the open markets. The objective of these investors is not to stay in the company indefinitely, but to receive gains on their shares and leave the partnership after 4 or 5 years.
There are capital investments that help business in their different stages of development: creation, development and crisis.
Various private or semi-public equities are present on the market. Some are specializing in specific sectors of activity (bio technology, information technology, etc.)
Venture capital is invested almost exclusively in new promising companies. Their processes, services or product are different from those offered by other companies and would likely be successful.
A venture capitalist can give an investment of more than 300,000 euros. Angel investors may contribute with share of 5,000 to 150,000 euros. In general, there is not a specific amount that dictates the capital investment.
Capital investments help the companies in different levels of the business life. Seed Capital is one kind of investment that allows companies to receive working capital for their initial activities. These activities may involve the creation and development of a new product or prototype. In order to receive it, they need to be legally registered.
Capital investment can be given also to companies that are have been in the market for some time. Post-creation capital is the kind of investment that applies to them.
All of these are examples of venture capital investments.