Venture capital consists of having professional investors take minority or temporary shares of the capital of start-up or recently opened businesses.
This greatly improves the financing of firms with high growth potential by creating favorable conditions for the granting of bank loans. Indeed, the capital of investors is a tremendous leverage to gain access to bank financing.
It also allows entrepreneurs to take advantage of advice from these investors, their experience, their address book, etc. It is not uncommon that investors hold a seat on the board of directors with a significant weight in making decisions.
Is there a difference between capital investment and Venture capital?
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.
The capital investment involved in all stages of business life: creation, development, transfer.
Frequently, the most common recipients of venture capital are companies that work in innovative or creative projects. Companies that work on the field of biotechnology, or IT are popular among venture capitalists.
Venture capital is almost exclusive to new companies, but not just any company. This kind of capital is given to creative and innovative young companies.
The typical investments of capital are higher than 300,000 euros. However, this does not mean that there are not venture capitalists who invest less. There are angel investors who may invest amounts from as low as 5,000 to 150,000 euros combined with other investors.
There are capital investments for every stage of development of any business. For example, Seed Capital is given to companies that have just started or those that are in the process of developing a new line of product, or prototype. Of course, this kind of funding is given to companies that are already legally constituted.
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.
These two mentioned forms of capital investments are kind of venture capital interventions.
