Three Significant Advantages of Venture Capital Funding
Venture Capital is something high risk This is why funding can be hard to obtain at time. As with everything, the higher the risk, the higher the payoff. This is one of the rules of finance. The trade off between return and investment is true across the board. This means that if you want to get into venture capital, and are not afraid of risk, you can face potentially huge rewards. This is no exaggeration. Just take a look at the 131 venture capital startups worth over USD 1 billion which are around. This number is only growing. Let us have a look at some of the advantages of Venture Capital financing. Hopefully this will influence you to participate more in this area.
Untapped Investment Sources
Venture Capital financing’s main advantage is the fact that new funding sources are opened up. It allows the venture capitalist to obtain large sums of money which they could otherwise not. For example, it allows for growth which would have otherwise been impossible without such funding. Sometimes getting a bank loan, or using other conventional methods simply are out of reach for the venture capitalist. This funding is essential to get through the initial high upfront costs.
More Flexible Obligations
Another significant advantage when it comes to venture capital is that the repayment of money does not work in the same way as with a bank loan. Repayment obligations are more flexible and sometimes arranged on a case by case basis. This is because the investor is willing to take on more risk due to future potential success.
More Forms of Help
Help can comes in more ways than financial. If you watch Shark Tank or Dragon’s Den, then you know what it is that I am referring to. Venture capitalists provide much more than just money. They provide their expert advice. They also give access to their unique industry connections. The investor often becomes a member of the board, or has some decision making power in the company’s activities. The result is that involvement in the company’s operations are very intimate.