Have you heard of venture capital financing? It’s a form of equity financing that involves the sale of an ownership stake in a given business to an investor. If you need capital to grow your business, you may want to use venture capital financing. You won’t have to take on any new debt, nor will you incur interest fees or other financing expenses. Rather, you can obtain capital by selling stock shares to an investor. Below are five common myths about venture capital financing.
5 Common Myths About Venture Capital Financing
#1) Better for Established Businesses
Venture capital financing isn’t necessarily better for older, more established businesses. On the contrary, most venture capital investors focus on early-stage businesses. They seek to invest in startups and other early-stage businesses with high growth potential. If your business falls under this category, venture capital financing might be a smart choice.
#2) Investors Only Use Their Own Money
Another common myth is that venture capital investors only use their own money. Most venture capital investors do, in fact, contribute some of their own money to the businesses in which they invest, but that’s not their sole source of money. Venture capital investors typically use funds, known as a venture capital fund, of money pooled together by their firm’s client investors.
#3) Venture Capital Financing Is New
Think venture capital financing is new? Think again. In the mid-1940s, the first venture capital firm was established, the American Research and Development Corporation (ARDC). Since then, more and more venture capital firms have emerged. Venture capital financing now ranks as one of the most popular forms of financing for businesses.
#4) Same as Private Equity Financing
They may share some similarities, but venture capital financing isn’t the same as private equity financing. Venture capital financing is a form of equity financing that involves an investor purchasing an equity stake in an early-stage business. Private equity financing is a form of equity financing in which an investor purchases an equity stage in an older, privately traded business.
#5) Only Offer Money
Most entrepreneurs seek venture capital financing for additional capital with which to grow their business, but there are other benefits associated with this popular form of equity financing. The venture capital firm with which you partner, for instance, may be able to provide you with guidance and expertise. Most venture capital firms have worked with other businesses in the past, so they know how to cultivate successful businesses.
This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.
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