Advantages of Venture Capital
Venture Capital is a process in which investors fund entrepreneurial innovation by offering finance and business expertise to generate long-term capital gains through development of market opportunities. Have a look below to know about the advantages of venture capital:
Large amounts of capital can be raised
Many small business startup loans are limited to $5 million, and it can be difficult to qualify, however, venture capital on large markets is available in quantities as small as $100,000 for a seed stage and over $25 million for more successful startups. There is also a tendency for companies to raise venture capital many times, allowing businesses to access vast sums of capital that would otherwise be impossible.
Monthly payments are not required
When a venture capital company invests in your business it will do so for the company's equity. That means that unlike small business and personal loans, your business does not have to make regular payments. This releases investment for your business, helping you reinvest by hiring a larger team, improving products, or continuing to expand operations rather than paying interest.
Experienced leadership and advice are available
Most successful startup founders build a partnership at venture capital companies after piling up their existing businesses. Usually, they are experts in scaling an organization, solving daily and larger issues, and checking financial routine. Also, if they don't have a startup experience, they are well-aware about supporting startups and sitting on boards of up to 10 at a time. That way, they can be valuable leadership resources for the companies in which they are invested.
More exposure and publicity
Most venture capital firms have a PR community and media connections and getting attention for your startup is in their best interests. Associating also can add a lot of credibility to a startup, particularly for entrepreneurs who haven't established many successful businesses. More exposure can lead to potential employees, partners, clients, and other venture capital companies interested in raising funding.
Personal assets don’t need to be pledged
Most of the time, you won't need to contribute additional personal assets to your business growth. While many start-up financing options will require founders to pledge their homes as collateral or use their 401(k) for start-up costs, most venture capital agreements will leave personal assets of the founders outside the discussion.
Help managing risk is provided
Bringing venture capital helps founders handle the risk experienced in the majority of startups. Startups are more likely to neglect significant problems as they have professional and expert team to oversee the growth and operations. In the first year, the failure rate for startups is still 20 per cent. However, if you have someone to take an advice from in a complex situation, it can result in several benefits.