The venture capital investment helps for the growth of innovative entrepreneurship. Venture capital has developed a result of the need to provide non –conventional, risky finance to new ventures based on innovative entrepreneurship. Venture capital is an investment in the form of equity, quasi-equity and sometimes debt-straight or conditional, made in new or untried concepts, promoted by a technically or professionally qualified entrepreneur, debt, which carries substantial risk and uncertainties. The risk envisaged may be very high as to result in total loss or very less so as to result in high gains.
Meaning of venture capital:
Venture capital broadly implies an investment of long term equity finance in high risk projects with possibilities of high reward. It is an equity (share) finance based on the principle that a partnership can be formed between the entrepreneur and the investors and thus represents an attempt to institutionalize entrepreneurship, particularly associated with innovations.
According to Jane Koloski Morris, editor of the well known industry publication venture capital has been defined as mentioned below: "It provides seed, start up and first stage financing" and also "funding the expansion of companies that have already demonstrated their business potential but do not yet have access to the public securities market or to credit oriented institutional funding sources. According to the European Venture Capital Association, the venture capital has been described as a risk finance for entrepreneurial growth oriented companies.
The venture capitalist essentially provides finance to businesses promoted by individuals who have sound project ideas and zeal but do not possess adequate financial resources to implement them. Such projects generally have a high risk element inherent in them; however, they promise highly attractive returns to the investors in the event of success. Thus, the venture capitalist bears high risks and hopes for...
Please join StudyMode to read the full document