| High growth incorporation tends to choose venture | | | | venture capitalists; they invest based on the risk and |
| capital funding to hasten the next growth phase. | | | | value of the company and when it's mature for exit, |
| Venture capitalists who focus on the company's | | | | they get a higher value. So, it is not about lending in |
| growth pattern don't require the pledging of assets | | | | the conventional banking sense. When a corporate |
| as required by lenders like banks. | | | | man approaches a bank, he usually asks how much |
| Venture capital financing is an option for corporations | | | | the interest is, the interest payments and what the |
| with a unique corporate proposition that may earn | | | | principal is. |
| high returns on investment of at least 30% a year. | | | | A corporation may also fear that the venture |
| These corporations require large outlays of capital. | | | | capitalist may pull out by selling or diluting its stake, if |
| Venture capitalists normally take an ownership stake, | | | | the corporation doesn't perform well. This is one of |
| to share in the corporation's business risk and profits. | | | | the reasons a corporation resort to bank borrowings |
| Therefore, it may become one of its institutional | | | | instead. |
| shareholders. In return, the corporation will benefit | | | | A corporation should view venture capitalists as |
| from the financial and operational support provided | | | | committed to invest in the company's growth, thus |
| by the venture capitalist's management team. | | | | creating value for themselves while providing |
| An important consideration for the corporation is to | | | | strategic guidance, business network contacts and |
| obtain enough capital to capture market share quickly | | | | sales referrals. |
| and additional funds raised through a venture capitalist | | | | It is advisable that corporations to be prepared to |
| can give the corporation sufficient working capital to | | | | give up the controlling stake; an issue that many |
| market, brand and sell the company's products. | | | | corporations are uncomfortable with. However, rather |
| Having an institutional shareholder or venture capitalist | | | | than focusing on losing control, a corporation should |
| in a corporation, gives confidence to your customers, | | | | consider the benefits derived. When the venture |
| as the shareholder would have done due diligence on | | | | capitalists invest in a business, there is a certain |
| the corporation and there is a brand associated with | | | | standard or value placed on the company. |
| it. | | | | A corporation needs to decide if the benefits of |
| Having a venture capitalist on board also means that | | | | venture capital funding outweigh the disadvantages |
| corporate governance is part of the company's policy | | | | and how important retaining ownership is in the entire |
| from the start. However, a drawback of venture | | | | equation. |
| capital financing is that a corporation may feel a lack | | | | When selecting the corporation in which to invest, |
| of control as the venture capitalist has stringent | | | | venture capitalists tend to look at four criteria, which |
| covenants like not allowing the corporation to change | | | | are people, technology, capital and market. A venture |
| its business direction without prior approval. | | | | capitalist also usually selects a growing corporation |
| Some corporations can't understand the difference | | | | with a bottom line or profit after tax is growing by |
| between lending and investing, as defined by the | | | | at least 25% annually. |