Venture capital can be referred to as money, which is provided by professionals or venture capital firms who invest this money in young and rapidly growing companies that has a good scope of developing, economically. Venture capital firms basically play an important role in financing the start-up companies small businesses, companies who want to launch an innovate plan or just give a financial support to an existing company. In other words, Venture capitalists, lend to offer financial support to new and fast growing companies. They also deal with companies who need assistance in development of new products or services.
Venture capital firm have long term plans and they are often ready to take high risks with the intention of earning higher rewards. Apart from being just passive financiers, Venture capitalists assist companies through their active participation. Venture capitalists involve in activities relating to management, strategic marketing and planning of their companies with whom they are investing. They can be called as entrepreneurs first and second as financiers. It is known that venture firms will invest in companies that are in their initial stages of growth. However, venture capitalists also invest in companies that are in various stages of their business life cycle. Venture capitalist may provide capital to a company who may be in the first or second stages of its business development. A venture capitalist will go ahead to invest even before the real product has been launched. It also goes to the extent of providing finance to a company who wants to grow or rather expand its business extensively.
There are many types of venture capital firms and funds organized as a limited partnership entity is common. In this case the venture capital firm serves as the general partner. Having said this, it is the independent venture firm that is considered as the most common type of venture firm and it has no affiliation with regard to other financial institution. You can call these types as “private independent firms”. Some venture firms are successful by having a joint venture with those companies which can support each other and grow accordingly. For example: one company has a good technological software product, but lacks in the ability of acquiring an adequate distribution technology. In such a situation, this company can be paired up with the joint venture company who has better distribution technology. Venture firms are private firms. They cannot exit before the maturity or expiry of the partnership deal.
A venture capital firm can be understood as a private partnership. Venture capital firms are basically providing opportunities for entrepreneurs to flourish. Venture capital firms get finance entrepreneur news with great caution and they are always alert about the rate of return of their venture capital investments. Actually, venture capital is not meant for everyone. It is not meant for all types of entrepreneurs. It is meant for those entrepreneurs who want to make it big in the industry and thus want to join the big leagues. The venture capitalist go through many investment opportunities before investing in only selected companies who show favorable investment opportunities. Venture capitalists may invest in companies dealing with construction, industrial products, business services etc. But there are also other venture capitalists who have specialized investment strategies. For example: a particular venture capitalist may specialize in retail company investment and there might be another venture capitalist who would prefer to invest in only companies who have just started their business and need financial assistance to grow.