What You Should Know About A Venture Capitalist

By: Wade Henderson

When a venture capitalist invests in a company the issue of ownership never fails to arise.
The issue of control often arises when talking about capital investments. When a venture capitalist brings in the funding to a company, the owner is bound to wonder if the participation entitles the investor of more control or power. Generally, venture capitalists do not replace the existing management and their participation is clear from the beginning.
The investments of a venture capitalist are not reduced to only one company. He or she may have shares in ten of them. For this reason, being a manager is not an option. However, they participate in the decision making process and will have access to the financial statements of the company.
Owners may be insecure about the venture capitalist to go to another company.
This is clearly not logic. A venture capitalist has a pool of companies that will include a few that are more profitable than others. However, a venture capitalist will find value in the whole pool and not in separate pieces. The risk is actually inherent in the profession of a venture capitalist and integrated into its pattern of profitability.
From a big portfolio of companies, not all of them will have the same level of returns. It would be riskier to the investor to put all eggs in one basket that is why having small investments in different companies is more attractive.
And even if the venture capitalist would leave the ship before it sinks, it is expected to sell its shares. But if the company is not doing well, it will find no purchaser at the price originally expected. It is therefore obliged to wait for it to go better.
What is the exit process of a venture capitalist?
The first possibility is that the entrepreneur purchases the shares and takes full control of the company. But if the company has grown significantly, it is difficult for the owner to raise the funds to do so.
Three options are available to the owner in that case: the stock exchange for larger businesses, the arrival of a new venture capitalist or the acquisition by another group. In last two cases, the situation is not temporary and the company finally goes into outside hands. The sense of dispossession is total if the new shareholder holds more than 50% of the capital.

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Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done. IMMFinancial.com venture funding private capital

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