Venture Capital Lately, venture capital firms have been investing in companies t

Question

Venture Capital

Lately, venture capital firms have been investing in companies that are close to going public, and in larger start-up firms such as Google. Venture capital firms prefer to risk their money on proven business models. Smaller companies that have been neglected by the venture capitalists are seeking financing from angels—small groups of individual investors.

Discuss what types of companies typically require venture capital financing and identify other company types that are unable to generate financing though venture capital. Why are they unable to obtain venture capital financing?

Explanation / Answer

Venture capital financing is not limited to a particular industry or a set of companies. But, it is given to those companies who have already transformed their business ideas into a profit making business and need expansion to cater the bigger market with economy of scale. Firms who operate in high end technology products need funds to bloom their business. In this situation, they are given venture capital financing.
Thus, any company, willing to go for venture capital financing should have:
1.   Stable and profitable business model
2.   Already established demand
3.   Need of expansion to compete in the market
4.   Forecast of high growth in near future
Any company whose business ideas have not taken any shape or they are not yet prove in the market in terms of demand, value building and positioning, don’t get venture capital financing. They can take support from development banks and angel investors who support startups.

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.