Venture capital: what is it for?

Every entrepreneur should get acquainted withsuch a concept as venture capital. It represents the funds invested in the fund of various companies for the purpose of their expansion or improvement. Venture capital can significantly increase the value of the enterprise on the market, which can not but affect its prestige.

This way of financing a business hassignificant benefits. For example, unlike bank loans, it is not necessary to return it and, all the more, it is not necessary to pay interest for using a loan. This, in turn, reduces the risk of bankruptcy of the organization in case of failure of the planned case. This type of investment places all responsibility strictly on the owners of the company, and the risk is distributed among all shareholders.

Of course, a venture capitalistinvesting is not left without privileges. He owns a certain percentage of the profits, and also receives a reward as thanks for his help in developing the core business. In practice, venture capital is often invested in a start-up fund of promising projects or sent to expand successful and well-functioning organizations. As a rule, investments are made for a period of at least five years.

Any provision of funds must bedocumented. In venture financing, convertible securities are used, especially such types as stocks and bonds, IOUs. The main task of the investor is to increase his existing capital through long-term financing of enterprises. Attaining the main goal is directed to its activity, the essence of which lies in the competent choice of an object. By investing in venture capital, most capitalists do not plan to interfere in the affairs of the company and put forward their own ideas, although they are members of the board of directors. Their authority is limited to financial support for the project.

For the investor, the most important moment isselect a specific object of investment. After all, this is a long-term form of financing, and for long-term cooperation and a strong union of the parties, you must fully trust the head of the company. If the capitalist is fully confident that the management team will make every effort to achieve positive results, then he will not have any complaints or additional questions. Ideally, the relationship between entrepreneur and investor should be respectful and open. At the same time, the manager can honestly tell about the existing problems or temporary difficulties, and also freely discuss plans for the near future.

Before you invest in a new company,should carefully examine the relationship of partners, the atmosphere in the team. It is very important to find out how strong is the belief of all employees in success, because it depends on how great their incentive to work, and hence the success of the work. At the stage of formation, the company needs constant monitoring, therefore, the manager will have to spend a lot of time at work. That is why a competent investor before signing a cooperation agreement invites the family of the owner to dinner in order to assess how harmonious the relations of the spouses are. No wonder, this is indeed a very important factor influencing the effectiveness of the functioning of the control of the governing apparatus.

Venture business in Russia is at the stage ofbecoming. The government is making a lot of effort to develop this area. However, the level of distrust towards long-term financing in our country is quite high, so it will be extremely difficult to convince the capitalists of the opposite.