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Sunday, March 17, 2013

The benefits of a venture capital company


U.S. BUSINESS INVESTMENT AND CORPORATE PROFIT

 Venture capital firms sometimes seek managing partnerships
Venture capital firms help businesses find equity investors

By Jonathan Blocker

When a private company plans to transform to a public status, there is need to strengthen the financial books so as to show continued commitment from investors. This is usually done by using funding from venture capital companies. A good example of a venture company is Keating Capital described in http://keatingcapital.com/. Apart from their money, venture capital funds have several other advantages that include:

Management


A venture capital firm often sends their management staff to the companies they fund. While this may be resented by some startups, the reality is that it is a gain to both parties. It is clear that not all entrepreneurs can manage their businesses successfully, and the invested interests of venture capitalist need to be protected. This protection comes in the form of a managing partner or even a management team to help in running the startup. Since these venture capital companies usually have vast experiences in management and finance, the expertise they can contribute to an entrepreneurial venture can greatly boost the venture's success.

Human resources


Apart from their management expertise, venture capital investment companies also assist the companies they invest in with the development of human resources. This help can come in many ways. For example, they can provide consultants widely skilled in hiring so that the startup can hire qualified candidates suitable for its growth. Hiring the wrong people can usually mean the difference between the success and failure of a business, so this is a very important contribution. Venture capitalists can also help with the training and development of in-house staff, which is also beneficial for the growth of a business.

Spreading risks


Venture capital fund is usually given out in exchange for a substantial percentage of equity. This equity acts as risk compensation since; after all, the amounts involved are usually large. Thus, a business that accepts venture funding in no longer solely owned by its founders. While this reduces the founders/initial investors' potential profits, to an extent, it also cushions them from potential losses. In case the venture fails or does not prove to be as profitable as envisioned, the loss is spread amongst all the involved parties. This may not always be the case though, since some venture capital investment firms opt for preferred equity. In the event of liquidation, preferred equity owners get paid before all the other investors.

The money


To most entrepreneurs, however, it is the funding that matters the most. Venture capital groups provide useful funding that can be used to expand a business before it is introduced to the public. It is not, as some people wrongly believe, only businesses that are in the red that need this funding. Even businesses that are in the black may need extra funds for things like market research, development or even purchase of assets. Also, the amounts involved may be too large for conventional financiers (such as banks) to handle. Thus, it is an alternative form of funding that a business can benefit from without having to sell some of its equity.

It is clear that venture capital companies have both benefits and concerns, but they are generally helpful. When a company is planning to go public and is seeking for funds, it is important to be careful on the choice of financiers. Venture capital funding is just as good as the company issues it.



About the author: Jonathon Blocker is an expert on information about venture capitals companies and the many benefits included. Jon searches for Keating Capital for further info about venture capitals and quality services. Add Jonathon Blocker on Google Plus.

Image credit: FRED; PD

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