Question
What are venture capital advantages and disadvantages?
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2nd Feb 2011 by sneha
Advantage
They can provide large sum of equity finance
Able to bring wealth and expertise to your company
Easier to secure future funding from other sources
The business is not obligated to repay the money
Disadvantages:
Lengthy and complex process (needs detailed business plan, financial projections and etc.)
In the deal negotiation stage, you will have to pay for legal and accounting fees
Investors become part owners of your business - founder loss of autonomy or control
Advantage
They can provide large sum of equity finance
Able to bring wealth and expertise to your company
Easier to secure future funding from other sources
The business is not obligated to repay the money
Disadvantages:
Lengthy and complex process (needs detailed business plan, financial projections and etc.)
In the deal negotiation stage, you will have to pay for legal and accounting fees
Investors become part owners of your business - founder loss of autonomy or control
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25th Nov 2009 by Amelia Timbers
Entrepreneurs tend to jump into venture capital without thinking through the significant pros and cons. Venture capital, or money invested by third party firms or individuals, is good because it provides the cashflow needed to launch or expand a business, with no interest. The downside is that the venture investors usually get a majority interest in the company (eg, 60-75%, depending on the deal). This can make it difficult for successful entrepreneurs to retain profits and control. Ultimately, the cost of using venture capital is very high, where financing a business off cash flow is free and borrowing from a bank, where possible, offers a fixed interest rate. Venture capital is most beneficial if the company fails. Unlike a bank, who can hold assets for collateral on a loan, venture capitalists who invested in your failed business just lose their money, or see a minute return on the shares.
Entrepreneurs tend to jump into venture capital without thinking through the significant pros and cons. Venture capital, or money invested by third party firms or individuals, is good because it provides the cashflow needed to launch or expand a business, with no interest. The downside is that the venture investors usually get a majority interest in the company (eg, 60-75%, depending on the deal). This can make it difficult for successful entrepreneurs to retain profits and control. Ultimately, the cost of using venture capital is very high, where financing a business off cash flow is free and borrowing from a bank, where possible, offers a fixed interest rate. Venture capital is most beneficial if the company fails. Unlike a bank, who can hold assets for collateral on a loan, venture capitalists who invested in your failed business just lose their money, or see a minute return on the shares.
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24th Nov 2009 In Venture Capital
2 Answers | 2524 Views
Subjects: venture capital,