venture capital

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Venture capital

An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.

Venture Capital

The provision of funding for a start-up. For example, suppose a company with little access to capital is attempting to open a new market or access an old one with a better product. It may not be able to receive loans, either because of an unproven track record or because it is already significantly in debt, and it may have exhausted financing from family and friends. Venture capital allows this company to begin and build upon its operations by providing necessary funding. Usually, the provider of venture capital takes equity in the company in exchange for the money. Venture capital firms may also provide needed expertise in how to run a business than can help the start-up become successful.

venture capital

A pool of risk capital, typically contributed by large investors, from which allocations are made available to young, small companies that have good growth prospects but are short of funds. Small investors can buy new issues or participate in mutual funds that specialize in the supply of venture capital. Also called risk capital.

Venture capital (VC).

Venture capital is financing provided by wealthy independent investors, banks, and partnerships to help new businesses get started, reach the next level of growth, or go public.

In return for the money they put up, also called risk capital, the investors may play a role in the company's management as well as receive some combination of equity, profits, or royalties.

Some venture capital also goes into bankrupt companies to help them turn around, or to companies that the management wants to take private by buying up all the outstanding shares.

venture capital

money subscribed in the form of SHARE CAPITAL and LOAN CAPITAL to finance new firms and activities which are considered to be of an especially risky nature and hence unable to attract finance from more conventional sources. There are a number of specialist institutions covering this sector of the capital market (see STOCK MARKET), including THREE I'S (formerly Investors in Industry) and the venture capital arms of the COMMERCIAL BANKS, INVESTMENT BANKS and MERCHANT BANKS.

Venture capital investors originally concentrated most of their funding on small start-up businesses offering innovative products, but recently a substantial proportion of their funds has been directed towards the less risky business of financing MANAGEMENT BUY-OUTS of established companies.

The British Venture Capital Association represents firms and institutions operating in this area.

venture capital

any SHARE CAPITAL or LOANS subscribed to a firm by financial specialists (for example, the venture-capital arms of the commercial banks), thus enabling the firm to undertake investment in processes and products that, because of their novelty, are rated as especially high-risk projects and, as such, would not normally attract conventional finance. In addition, in recent years venture capitalists have become increasingly involved in financing MANAGEMENT BUY-INS and MANAGEMENT BUYOUTS. See JUNK BOND, THREE I‘S.

venture capital

A common name given to money raised for investment in high-risk enterprises. Venture capital firms may specialize by industry and/or by stage—seed money for start-ups, midstage firms on the brink of success but needing additional capital, or successful firms capable of expansion to a regional or nationwide platform. There is a National Venture Capital Association (www.nvca.org). Sometimes called angel investors.

References in periodicals archive ?
Cutting-edge ideas which identify a problem and provide a unique, workable solution are the domain in which the venture capitalist functions, he said, adding that NEEI has received around 200 business plans from prospective entrepreneurs in the region.
A"You see patterns in how venture capitalists respond like old dogs that don't learn new tricks,A" Faust said.
Paul Maloney, the officer representing GMB members who work for the AA, said: "GMB are calling upon Gordon Brown in his next Budget to end tax relief for interest payments on loans used by venture capitalists to buy companies like AA, Birds Eye and Sainsbury's.
It means that venture capitalists already have their hands full "struggling with companies that are hanging around like a kid in his fifth year of college," says John Taylor, director of research at NVCA.
A venture capitalist wants to be confident that the management team's experience, skills, and track record make it a team that is likely to succeed.
Venture capitalists generally target a 60-80% annual rate of return on their investments, in part to make up for high failure rates.
Given the current condition of the Internet IPO market, venture capitalists are reluctant to invest in privately held Internet companies that will be difficult to take public.
The pension funds insurance companies, and university endowments who invest with venture capitalists expect a 30 percent annual return, and the venture capitalists look to the hot sectors to realize that return.
Venture capitalists, some of which are supported by major banks, formerly specialised in providing capital for start-up businesses, but now concentrate on management buy-outs and are always on the look-out for companies as investment opportunities.
Venture capital also entails an active and motivated working relationship in which the venture capitalists take on important roles within their portfolio firms in which they have invested.
Yet, with the IPO market experiencing its first downturn in three years, venture capitalists may have to wait longer to cash out of their investments by selling their stakes to the general public.
Instead of loaning money and requiring the fledgling entrepreneur to start repaying the loan immediately, venture capitalists trade up-front cash for part ownership in new companies; venture firms make their money if and when the embryonic businesses go public or sell out to larger companies.

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