What are the sources of Venture Capital Financing?

 

Well-heeled investors, investment banks, and other financial institutions are the most common sources of venture capital. It does not always have to be in the form of money; it can be in the form of technical or management skills. A type of "risk capital" is venture capital. In other words, capital invested in a project (in this case, a business) where there is a significant element of risk associated with the creation of future profits and cash flows. Risk money is invested as shares (equity) rather than as a loan, and the investor expects a greater "rate of return" to recompense him for his risk.

The venture capitalist may use one or more of the following types of share capital in structuring its investment:

Ordinary stock: These are equity shares with the right to all income and capital after all other classes of capital and creditors' rights have been satisfied. Ordinary shares have voting rights. In a venture capital transaction, these are typically the shares held by management and family.

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