A Quick Introduction To Venture Capitalist

A venture capitalist is an investor who provides capital to start up ventures or supports small companies that wish to expand but do not have enough funds. Venture capitalists are willing to invest in such companies because they can earn a massive return on their investments if these companies are a success. They also may experience huge losses when their choices fail. Yet they can afford to take such risks either because they're typically wealthy or they vouch the great idea and a great management team of the young, unproven companies. 

Venture capitalists (VCs) displays the most glamorous and appealing form of financing to many entrepreneurs. Many of the best-known entrepreneurial success stories owe their growth to financing from venture capitalists. Here's some basic information about the Santa of entrepreneurs -

• In the venture capital industry, the general partners and other investment professional are often referred to as “VCs”.
• Venture Capital differentiates from buy-out private equities, since VCs take a role in managing entrepreneurial companies at an early stage.
• Venture Capitalists come from operational or a finance background though typical career background may vary. Those with an operational background tend to be former founders, executives or management consultant of companies. And those with finance backgrounds intend to have investment banking or other corporate finance experience.
• Venture Capitalist typically invest at least 25% of feasible annual returns within one to five years.
• They often demand 50% or more ownership to exercise control over the investee firm to offset their high risk.
• They provide management and industry expertise and business connections with other firm and venture capitalist.
• Their objective usually is to bring the business to its initial public offering (IPO) stage so that they can sell their shareholdings to the public at high profit, and get out.
• Their contributions, in the form of financial support, business management experience, networking contacts, etc., add value to the companies they invest in.
• Venture capitalist clients may include trust funds, pension funds, individuals or other types of institutions.
• The venture capitalist must weigh all the facts to make a decision as to which end of that spectrum a potential investment will fall.
• Venture capitalists must have deep knowledge of all aspects of business finance and management.
• The ability to read, comprehend and understand the ramifications of financial records is expected for venture capitalists.
• Venture capitalists must be well versed in the marketplace so that they can predict whether a product or service offered by a particular business has enough strength to succeed.
• Unlike banks and other lenders, venture capitalists frequently take equity positions as well. That means you don't have to pay out hard-to-get cash in the form of interest and principal installments. Instead, you give a portion of your or other owners' interest in the company in exchange for the VCs' backing.

Finally, VCs come in all sizes and varieties, and they're not all bad. They are no less than a Godfather for an entrepreneur!

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