Incorporation – Seeking Venture Capitalists Help

Corporations with high growth, who are looking for further growth, choose venture capital funding to aid their cause. Institutions like banks require the pledging of incorporation’s assets, but venture capitalists who focus on the corporation’s growth don’t.

Venture capital financing come across as a unique proposition to companies that may earn high returns on investment of at least 30% each year. Venture capitalists generally take an ownership stake to share the company’s profits as well as risks, for incorporations require a large outlay of capital. The venture capitalists become a part of the company’s institutional shareholders, lending the company financial and operational support.

Companies are always looking to get hold of enough capital so that they can capture market share quicker, and in such situations the extra capital generated through the venture capitalist can be the added boost, that eventually helps the corporation to succeed. Being associated with a venture capitalist adds corporate governance to the incorporation’s policy. But at times a venture capitalist’s strict rules or vigilance might curb the company from changing their business direction.

It is vital to learn the difference between investing and lending. Venture capitalists always invest seeing the risk and the value of the company, making sure to exit when the time is right, thus getting a higher value. Despite all the benefits, some corporations still fall back upon the banks to lend money for they fear that a venture capitalist might pull out by diluting or selling its share of the stake, if the company isn’t doing very well.

Companies should have faith and trust in the commitment that the venture capitalists make, when they choose to associate themselves with any company. Only then will they be able to extract the strategic guidance, network contacts and sales referrals from the venture capitalists. But companies must relax their authoritative hold on their companies when they appoint venture capitalists. Instead of fretting about having lost control over their beloved incorporation, they should instead be proud of the standard that comes with the appointment of venture capitalists.

At the end of the day, the corporation has to weigh up the pros and cons, and decide whether they want to appoint venture capitalists to be associated with their company or whether they consider venture capitalists to be a threat to their ownership.

While selecting a corporation to invest in, venture capitalists generally looks at growing companies or ones with the prospect of growth where the bottom line or the profit after tax is growing by 25% per annum. Also they look at the company’s personnel, capital, technology and the existing market before choosing a company, to invest in.