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Wednesday, February 23, 2011

The Importance of Venture Capital for Start-Up Businesses

By Rose Brazil

Venture Capital is a finance that is furnished to start-up companies that have high potential growth but are too small to raise capital and are not yet capable of obtaining a bank loan. The ventured capital fund which is also called as seed capital makes money in exchange for an equity stake of the company it invests in. They usually get considerable control over company's decisions, apart from owning a significant portion of the company.

These financial resources are vital for entrepreneurs who have projects such as product innovation or research development that needs potential investors. Financial institutions like banks offer loans to entrepreneurs however, they demand the payment of interest on the invested capital. Angel Investors on the other hand, are mostly opulent retired individuals who are willing to venture capital in early-stage businesses or expanding enterprises, in exchange for stocks and bonds of the company. These enable them to stay abreast with the development of the business sector even while enjoying their retirement.

Naturally, these entrepreneurs need significant support to get their ideas off the ground. It is imperative to have a healthy system of connections of lawyers, accountants, and other business professionals who understand the challenges of start-up companies in establishing a feasible Angel Investor Network, with specialized services that include intellectual property protection, auditing, workforce development, and Initial Public Offering (IPO) registration. At an early stage of the business development, an experienced Angel Investor can contribute knowledge and skills to an entrepreneur on how to run the business. They may also be good sources of useful contacts allowing entrepreneurs the opportunity to network with others in their industry.

Grow-Connect, a platform that matches and connects entrepreneurs with investors.

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