Venture capital

 

When businesses wish to start-up or develop their grand plans for world domination, they are usually held up by one key factor: money. Whether it is to finance a new plant and machinery, the purchase or a lease of new premises, or the chance to hire new staff to expand your offering, money lies at the heart of it all.

Entrepreneurs and businessmen face significant decisions when they come to seek finance for their new ventures and plans. Finding the most appropriate backer can be difficult, as each funding option comes with its own set of advantages and disadvantages.

The best way to sift through the options and find the right one for you is to discuss your plans with a commercial lawyer or business advisor.

What is venture capital?

Venture capital is funds that are invested in a business by venture capitalists in return for a share in the business’ equity. Venture capitalists often fund a business for the medium- or short-term.

Venture capitalist firms are companies which pool together investor’s funds. This is a form of private equity financing.

Why is venture capital used?

Businesses often need access to funds in order to achieve their medium- or long-term goals. All types of financing come at a cost, whether that financing be achieved through issuing shares or borrowing from a financial institution.

Venture capital can be a desirable form of financing for a business because the venture capitalists usually offer their expertise as well as the funds.

It is in the interests of the venture capitalists for the business to succeed, so that they achieve a profit, thus the interests of the investor and business are aligned.

What are the alternatives to venture capital?

There are many alternatives to venture capital, for example:

  • Businesses may choose to borrow money from a financial institution, so as to avoid having to give up any of the equity in their business or control over the management of the business
  • Joint ventures
  • Mergers and acquisitions

What is the difference between a joint venture and venture capital?

A joint venture involves two or more businesses pooling their resources together to achieve a joint goal. A joint venture provides advantages to both businesses, as the risks and rewards are shared.

How do you utilise venture capital?

There are many venture capitalist firms in the market which are on the lookout for businesses in which to invest. Choosing the right venture capitalist firm is an important decision for a business.

It is important to select a firm and solicitor with experience in the same industry and type of business. You should also consider the different types of investment, including seed funding, product development and succession funding.

Using a specialist solicitor for your industry will give you the best chance of future success.

Are you dealing with a venture capital issue in the course of your business operations? Contact Law can put you in touch with a specialist company and commercial solicitor, experienced in the laws surrounding venture capital. Please call us on 0800 1777 162 or complete the web-form above.

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