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Main Concerns About The Participation Of A Venture Capitalist
Is the question of control a reasonable concern when it comes to the participation of a venture capitalist?
In fact, many owners are concerned about this topic when considering venture capital investments. It is only natural that a business owner will feel insecure that the participation of a venture capitalist will entitle it with more power. However, venture capitalists have no interest in becoming managers.
Often a venture capitalist may be a shareholder of a dozen other companies. It would be impossible for him or her to manage all of them. However, it is often used in the board of directors of the company and its supervisory bodies. He has access to the financial statements of the company, its balance sheets, and income statements.
Another concern of owners is the fear of venture capitalists going to another company.
This fear though reasonable is unfounded. A venture capital generally has a series of investments in different companies, some of them more valuable than others. Nevertheless, the goal of the venture capitalist is not to go with the most profitable but to have profit from all of them. There is less risks when funding is given to more than one.
An experienced venture capitalist will know that the profitability of its investments is not guaranteed and that he or she should cover all bases to be able to see better results.
There is also the possibility of a company going bankrupt or out of business. The responsibility of the venture capital is to sell the shares when the contract convenes it, risking losing some money. However, he or she may also choose to stay around and wait for the company to improve when its finances are failing.
The exit of the venture capitalist is another concern.
The first option is for the owner of the company to buy the shares for the investor. The more successful the company has become, the more expensive the shares will be and the owner may not be able to afford it.
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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