Venture Capital is a source of funds that used to finance new proposal or ideas involving new technology pr products which are risky but with a potential of high returns. It is a capital committed in the form of share-holding for the information and setting up of a firm, specializing in new ideas ortechnologies. In other words, it is a long term fund in equity or semi-equity form to finance high tech projects involving high risks and yet having strong potential of high profitability.
In India, the venture capital has largely been sponsored by financial institutions.
It benefits the investors when they are invited to invest only after organization starts earning profit, when risk is low and growth is healthy.
It makes contribution on technological innovations and promotion of entrepreneurship.
It helps the industrialization, technological development, generate employment and help develop entrepreneurial skills.
Kinds of Venture Capital:
- Equity Capital - The Equity
Capital refers to that
portion of the house’s capital, which is raised in exchange for the share of
ownership in the company.
- Risk Capital – It representing financial investment in a highly risky proposition in the hope of earning high rate of return.
- Start-up Capital - Startup capital refers to the money that is required to start a new business, whether for office space, licenses, permits, product development and manufacturing, inventory, marketing or any other expense.