Venture capital funding is a kind of financing in small and medium enterprises where investors invest their money in the venture having a chance of potential growth and seeks equity stakes in the business. This can also be referred to seed funding and the venture capitalists provide finance and money at very early stage of the business that is showing strong chances of growth. A high degree of risk is associated with the venture capital funding however the rate of the return associated with this kind of funding is also very high.
By investing the venture capital within the company the investors become a stakeholder of the company at its early stage and look for the profits and returns that may result from the IPO and the trade sales of the growing company. Every venture needs to attract venture capitalists in order to gain funds and money while starting up a new business or launching a new product.
Venture Capital funding has five common stages that are the seed stage where the new product or a project is ready to get launched. The seed stage is followed by the start up stage and the first and the second stage of the project. The final stage is the pre-public stage where the final project or product is ready but still not launched among the public. At seed stage the investors provide finance to the business for early research, material buying and early development of new product. The first stage of venture capital financing is the stage where the business is not ready for the commercial launch but is complete and operational. The second stage includes the financing of the seed stage as well as the first stage.
Shamsa Rafique