Venture capital: meaning, characteristics
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The term ‘venture capital’ represents financial investment in a highly risky project with the objective of earning a high rate of return. While the concept of venture capital is very old, the recent liberalisation policy of the government appears to have given a filip to the venture capital movement in India. In the real sense, venture capital financing is one of the most recent entrants in the Indian capital market.
Features of Venture Capital:
The main features of venture capital can be summarised as follows:
(i) High Degrees of Risk:
Venture capital represents financial investment in a highly risk project with the objective of earning a high rate of return.
(ii) Equity Participation:
Venture capital financing is, invariably, an actual or potential equity participation wherein the objective of venture capitalist is to make capital gain by selling the shares once the firm becomes profitable.
(iii) Long Term Investment:
Venture capital financing is a long term investment. It generally takes a long period to encash the investment in securities made by the venture capitalists.
(iv) Participation in Management:
In addition to providing capital, venture capital funds take an active interest in the management of the assisted firms. Thus, the approach of venture capital firms is different from that of a traditional lender of banker.
Features of Venture Capital:
The main features of venture capital can be summarised as follows:
(i) High Degrees of Risk:
Venture capital represents financial investment in a highly risk project with the objective of earning a high rate of return.
(ii) Equity Participation:
Venture capital financing is, invariably, an actual or potential equity participation wherein the objective of venture capitalist is to make capital gain by selling the shares once the firm becomes profitable.
(iii) Long Term Investment:
Venture capital financing is a long term investment. It generally takes a long period to encash the investment in securities made by the venture capitalists.
(iv) Participation in Management:
In addition to providing capital, venture capital funds take an active interest in the management of the assisted firms. Thus, the approach of venture capital firms is different from that of a traditional lender of banker.
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