Purposes, types, forms and objects of venture financing
The purpose of venture financing is receiving profit by the investor as a result of investment of capital in perspective, but risky projects and business.
By types of investment distinguish internal and external venture business.
Development of the first look is carried out at the expense of resources of offtakers of idea. Financing of an external venture comes in the way of attraction of financial resources from various sources: investment, insurance, charity, pension funds, resources of the state, private investors.
Risky investments can be carried out in several forms:
in exchange for transfer into the ownership to the investor of part of stocks of the enterprise;
in the form of a medium-term loan, with repayment periods from 3 to 7 years;
in the form of a combination of two above-named forms of investment.
Objects of investment are some types of the enterprises:
firms-start-up (the approximate translation "the beginning of a way") – absolutely new companies which are only formed and have no experience in the conditions of the market;
firms beginners – those enterprises which arose independently, already have ready practices, but have no means for further development;
firms ex-pan-sulfurs (from the word expansion – expansion) are the companies which already completely mastered the market niche and are ready to expand the influence on others, but on development of "new territories" they have no money;
business ideas – simply risky project without any material resources which for receiving real profit demands financing from it.
Technique of venture financing
As a rule, the venture investor makes the investments in rather small enterprises in size. These companies usually are joint-stock companies, whose shares aren't traded at stock exchanges and are in property at small number of their owners.
You shouldn't identify venture financing with bank crediting or to perceive it as one of forms of strategic partnership. This a bit different concept.
Unlike the bank credit organizations, the reckless investor doesn't demand material security (pledge by property) for the means provided to the enterprise.
And unlike strategic partnership, the company or the individual providing venture investments can't make any powerful impact on acceptance by the management of object of investment of capital of certain decisions or correct its course of development.
The financing company is the passive observer who bears only risks of financial character rather. All completeness of responsibility for destiny of venture business lies on his owners.
The even competent and carefully counted investment of capital can't guarantee receiving positive result. Effective venture investments are considered if the market value of the pro-sponsored company within 5 years increases several times.
Despite all risks connected with such method of investment, venture business becomes more and more popular form of business management as allows, on the one hand, businessmen to receive money for the development, and on the other hand, to get to the reckless investor solid profit.
