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| Are you a startup company that needs funds to | | | | 1. First is the value system of the company who |
| launch? Are you an established company in need of | | | | seeks funds from them. This makes them ascertain |
| funds for expansion? Are you running a company | | | | how strong the morals are and would be able to |
| stricken with huge credit lines and in dire need of | | | | assess the core strength of the company. If this is |
| funds? Whatever the reason is that you need funds | | | | satisfactory then the company can weather any |
| for; venture capital provides you the solution to all | | | | storm. So this becomes very relevant. |
| your financial needs. | | | | 2. Second is the rate of return of money invested. |
| How Venture Capital Works | | | | This is for obvious reasons. No free lunches here. You |
| Investors release funds to those companies that | | | | got to know how much you would get if you are |
| they feel have enough potential to be successful. | | | | investing something. This will be checked out and if |
| Venture capital firms are managed by different | | | | satisfied then there will be confidence in the minds of |
| individuals from various fields and sometimes by the | | | | the venture capitalists to invest. |
| venture capitalists themselves. | | | | 3. Third, they would look for an exit option. Business |
| Now, we know that venture capitalists release funds | | | | is a gamble at the end of the day. You got to know |
| to companies that are in need of money to develop | | | | when to jump ship. You got to make the provisions |
| and advertise. What do the venture capitalists get in | | | | at the start itself. They would look for one and if |
| return for this? They get a share of the equity and a | | | | they know they can sneak out unharmed when the |
| part of the ownership. Sometimes they will even | | | | ground slips under the feet, then they will give a |
| settle for seats on the board of directors. It all | | | | confident okay to the project. |
| depends on how much you need and how they give | | | | There are various jargons that are used in case of |
| you as well as how much they want in return. | | | | venture capital investments. There is sweat equity, |
| Venture capitalists are not just the ones who give | | | | which as the name suggests is all about the sweat |
| out money. That is not the sole reason though for | | | | investment. The lawyers and other professional just |
| companies to approach them. It is their line of | | | | work without getting paid and invest with their |
| contacts as well as the reputation that comes with it | | | | sweat. They do this only if they have faith in the |
| that are more attractive to companies. While money | | | | firm. Later on for their sweat investment would |
| is important, it is not everything in business. Your | | | | expect to be rewarded with huge contracts and |
| contacts; who you know are just as important a | | | | other lucrative services. |
| factor. If you are associated with the right venture | | | | If you need funds to just do the groundwork and |
| capital firm, which has a very good address book of | | | | develop a blueprint of the business and the venture |
| associates and decent network then your work is | | | | capitalists then it is called pre-used funding. If the |
| done. You have got a great deal right there itself. | | | | funds are given to develop a model product and |
| The venture capitalists just do not barge into any | | | | recruit a management group then it is called |
| and every business that asks for their capital. They | | | | self-funding. |
| do their homework too and they do comply with | | | | In case, the funds are given to aid with the |
| their ground rules. | | | | completion of product and the starting of marketing |
| Broadly, there are three things that they take into | | | | then it is called startup funding. |