The Ins & Outs of Venture Capital

Venture Capital

When it comes to investing in companies, one of the biggest and hottest investments right now that people are making are in venture capital. Venture capital has become more and more in the spotlight because of new shows like “Shark Tank’ that showcases exactly how it works. Each episode several entrepreneurs that come from small-scale companies to large companies come to the Shark Tank to pitch their idea and or company to the sharks.

They give their background, what product or service their company provides, revenue, how much they want in exchange for equity in the company, and much more. Then the sharks fight each other to get the deal. This TV show is pretty accurate on how venture capital works, but completely accurate. With venture capital spreading around the world, it has helped many people gain money for their business that a bank would not have given them. This has allowed a lot of ideas to be funded.

Many financial and tech hubs are turning to venture capitalism instead of traditional banking loans because of high interest and banks become much more strict on who they give money too. One such city is New York City. After the 2008 financial crisis banks became much more strict with their money even after federal reserve banks around the world started slashing interest rates to historic lows.

With a void in the financing of capital to business, someone had to step in and provide this demand for capital. Venture capital really took off in this era. Another hub that is embracing venture capitalism is Singapore. Venture capital in Singapore has never been higher. This new wave of cash has transformed Singapore into a worldwide center of business and finance. Many people have become rich because of this new wave of money that would not be otherwise.

There are normally two types of venture capitalist. People with a lot of money that individually selects companies to invest in, or big venture capital firms that collect equity in companies. Note that holding companies and venture capital firms are different because holding companies normally hold other companies in stock and does not invest directly in their capital. Venture capital has also sprung up fast in the real estate industry because of how easy it is to invest in land and buildings.

Big real estate companies have turned to venture capital to finance their projects. People may assume that only rich people invest in venture capitalism but that is not the case. Many smaller investors are starting to pool together their money to invest in companies via venture capitalism. This has allowed even the small time invested to make a big profit if a company does really well. With venture capitalism, there is always a chance to become rich.

One thing investors need to know about venture capitalism is that this is not a get rich quick scheme. Most businesses fail after they are created. That is why in big firms analysts are typically hired to look at the books of businesses to make sure that they are legitimate and that they have a chance to make a big profit.

With government regulation becoming less and less it is a good time to look into investing this way to make some profit. Before venture capitalism the only person lending out money on a big scale for business was banks. Now that venture capitalism really taking off instead of interest being charged it is equity being charged. In the future people will rely less on banks and more on venture capital to fund their business. But instead of business being funded by venture capitalism, it is often their dreams being funded.