Notes About Business

Often overlooked by small and medium businesses, venture capital remains a private source of funding available at all stages of business life.

An average of 5000 companies funds their operations through the use of any private equity investment. However, a great number of businesses still reject the idea of using this type of funding due to ignorance of their benefits, or mistrust.

Are Private Equity and venture capital the same then?

Actually, venture capital is only one kind of private equity investments. There are other popular categories in which private equity is invested: growth capital, leveraged buyouts and distressed investments. All of these types of capital investment provide funding to business during their life cycle. Venture capital is for their beginning, growth capital for their development and distressed capital and leveraged buyouts for times of crises.

What is the advantage for the entrepreneur?

During the life of a business, funding is needed to make the business flourish. Moving it forward at the beginning and developing it when it is mature. In any of those cases, private equity investments are a great relief to the finances of small business. The business owner does not need to ask for a credit and it can potentially attract more financing in the future.

Can the private equity investor become another partner?

Capital investors usually have a plan of leaving the company after a certain number of years. However this date is not determined before hand. Capital investors want to provide funding to the business and focus more on the long term rather than the short.

Capital investors do not specify when they will leave the partnership or the company, but they stay no less than three years but no more than seven. They receive the value of their share just like any other shareholder but increase the value when they sell it. That is the ultimate goal of a venture capitalist for instance, selling his or her share and make a profit.