Need Information about Venture Capital

Discussion in 'Starting a Business' started by realitybites.in, Mar 25, 2010.

  1. realitybites.in

    realitybites.in
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    I need information about Venture Capital

    i am really not able to understand how Venture Capital works for me ( Company which takes Venture Capital )
    after getting fund....when to repay , is there any profit sharing , do we need to pay interest to the amount...that we get ..etc
    basically i am not able to understand how it works
     
  2. Fergal

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    Hi realitybites.in, all venture capital (VC) deals are different. VC is considered to be risky finance and often applies to businesses that banks consider to be too risky for loan funding. Because of the risk involved, the venture capitalist will usually seek a much higher return than what a bank would require from loan funding.

    VC deals take a variety of formats, but the VC will generally take a share of the company in return for their investment. They get paid back by getting a share of the profits (if there are profits) and by selling their share of the business, if it is successful.

    Due to the way they take a share of the business VC's will generally play a role in managing the business, often taking a seat or two on the company's board of directors. A good VC will provide experienced advisers to the company and the support the company receives from this advice and involvement, is another advantage of utilising VC funding.

    Do you have any further questions on VC funding? Is there anything specific that we can help you with?
     
  3. realitybites.in

    realitybites.in
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    Thanks Fergal

    Can we get ride of them ...if we buy the shares back for them

    and if ...business gets big lose

    then what will venture capital do
    do they share the lose or what
     
  4. Fergal

    Fergal
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    Most VC's will have an exit strategy built into the deal / contract. The VC's don't want to stay in the business long term and the exit strategy is how they plan to get out of the business and get a return on their investment. In most cases that will involve selling their share, they probably won't mind who they sell it to, once they get a good price for it. Hence, they would be happy to sell it to the company founders or management, but only if they can't sell it for more, to someone else.

    The contract will also include terms as to how potential future losses will be managed and each contract will deal with this eventuality in a different way. However, I would expect that most of them will not be willing to put more money into the business, in the event that it makes unexpected and unplanned losses.
     
  5. seanstevens

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    Generally VC's do not like to make any losses and like to have a say in how the company is run. They tend to like placing a member of their own company on your board of directors. Getting rid of them is a matter of paying them off, but if the business is profitable they will not leave unless the offer it too good to refuse.
     
  6. eddane

    eddane
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    Check out the wikipedia entrey - its has a good explanation.

    Ed
     
  7. GekiDan

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    Well, mind if you can link it here...:p

    Anyways, please don't put all your trust to Wikipedia. Wikipedia can easily be edited and readers can easily be deceived by wrong information giving by not-so-good people. There are other good sources along the net that can help you.

    Wikipedia is not only the site that can give you information. There are many others.
     
  8. realitybites.in

    realitybites.in
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    The answer which i wanted ....i found out here .... and not in Wikipedia

    and in Wikipedia we don't get answer to all over question ( I accept they are really good ...and one of the best place to get answer ....but not every time )
     
  9. scifi

    scifi
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    venture capitalists usually invest in Business with high ROI- Return on Investment prospects....They usually associate with a business for a peculiar amount of time and once they get their desired profits, they made an exit.....But they not only bring capital but also bring in their skills set and expertise with them into the business since their interest is also associated with it...:)
     

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