Venture Capital: What Is It And What Does It Do?
The presence of venture capital or VC acts as a provider of capital to companies that are just starting so they can run their business smoothly. Startup companies still need a lot of assistance in the form of financial capital to expand their business broadly. One way is by having venture capital.
What is Venture Capital?
Venture Capital is a company that provides loan capital to startups to help develop startup businesses.
Usually, companies that are given capital are technology companies or startups. This is because startups have more potential to grow and survive for quite a long time.
When providing capital, the company that will be given will be selected according to the criteria. Venture capitalists will usually channel well-known investors who want to invest in these startups. So that its presence is more like a media that bridges investors and fund seekers for startup companies.
Not only as intermediaries, but they also carry out analysis and supervision of startup businesses to determine what criteria startup companies are eligible to invest in. They do this to seek returns so that there is profit to be made between investors and startup owners in the future.
What are the Duties of Venture Capital?
Previously it was explained that they are not only channeling investors but have other duties, such as.
- Looking for investors as limited partners
- Choose a startup company that will be given capital
- Manage the funds that will be given to startup businesses
- Investigation of funds that have been distributed
- Building networking and branding networks
- Supervise the company’s operations internally
How Does Venture Capital Work?
Investors will provide capital money to venture capitalists, then they will find new startup businesses to carry out work agreements.
Then, the venture capitalist will manage the funds and give them to startups.
Investors give money to venture capitalists. Furthermore, they will provide advice to startups on how to seek opportunities to gain profits.
After that, they will carry out administrative, accounting, internal reporting, and IT tasks to control the funds that have been provided.
If profits are already there, they will share the results with investors and startup owners. Profits will have a greater chance of being achieved if the company has been successful and has gone public to become IPO shares.
The Challenge of Becoming a Venture Capitalist
The challenges they face are enormous. They must be able to develop strategies to beat competitors, they must also be able to convince investors. So, investors don’t necessarily come voluntarily but must be convinced to want to provide capital to startups.
The company is also required to be able to find large-scale investors. If not so, it will be difficult to compete with existing competitors.
Likewise when providing funds to startup businesses. Even though they have done their previous analysis, they can only predict what will happen to the startup business based on the data. Thus, it is very risky to provide funds to startup companies that are just starting or are not well known.
Venture Capital has quite a lot of tasks while carrying out its work. However, when a company that is given capital becomes successful, the profits are enormous.
