Venture Capitalism Case Study
Generally new companies have less field experience and exposure and hence they require funds to operate. Therefore, venture capital is the only savior. Venture capitalists usually invest in the new businesses after getting a share in the equity and have various functioning powers. They invest at early stage of the development of the companies so that it can prosper in the future. Venture capitalists can be financial institutions, investors etc.
Revenue Generation by Venture Capitalists
Generation of revenue is the main purpose of investment. While venture capitalists become part owners because of their investments, that is why they have share in the profits of the company like other investors. However, due to initial …show more content…
In order to get maximized profits the difference between the selling and purchase price must be significant. While selling the investments the sales price is valued on the company’s diversification. Therefore, the main reason for investing in startups is to maximize the company’s worth in the investment period. Hence, they also provide businesses with managerial and technical skills, so that they can prosper in their field. Making it capable enough to achieve breakeven point and further to make profits and acquire major market share holding in the …show more content…
The perfect way out strategy is to offer public via an initial public offering; this can generate huge profits that were expected from obtaining such risks. Other ways out strategies that are not common are being acquired by other company etc.
Risk as well as Reward
The maximum profits earned are the result of risks undertaken by the investors while investing in startups. There are a large number of problems that needs to be addressed when looking to invest in new companies.
Firstly look into the strategic planning of the company and its future goals and policies. The goals must turn out to be profitable. On the contrary, many new plans are not adopted by the market. Hence, strong opposition in the form of competitors is also to be considered while planning investments in new startups. Law and other factors are also to be looked into for new businesses.
Angel investors and venture capital investors show that the founders are also an important factor as the plan itself. Therefore, they should be able to take the plans from initial stages to production level and should not be disappointed by early failures. In addition, they should also be able to respond positively to feedbacks acquired from customers or employees. Hence, they must be adaptable to change in the fast paced environment and growing