Venture capital financing doesn’t happen cheap for company owners. Partners in the joint venture actually buy a part of shares of the enterprise in exchange for the investment. This percent of shares in different cases also depends on the invested sum, cost of the enterprise, expectational return of investments. He can fluctuate from, probably, 10 % in case of the settled, profitable enterprise, and to 80 or 90 % if the enterprise is created for no reason or if the enterprise has financial or other problems. The majority of venture capital firms, at least originally, don’t demand more than 30-40 % because they want that the owner had stimulus to continue to build business. If then additional financing is required to support business growth, the share of the investor can exceed 50 %, but investors understand that owners/managers of business can lose their enterprise eagerness under such circumstances.
In the final analysis, however, the investment firm, irrespective of its percent from the property, really wants to leave management in hands of managers of the enterprise because she actually and first of all invests the capital in management team.
The majority of investment firms determine the size of the share of ownership of the enterprise a ratio of put means in comparison with the existing cost of the enterprise and contributions of all participants of cooperation management enterprise. It is obvious that existing value of the contribution financially the unsuccessful enterprise will be estimated by owners low. Often it is estimated only as cost of idea and costs of time of the owner. The contribution is estimated by owners of prospering business much more above.
A financial estimation is not the exact science. The final compromise at cost of the contribution of the initial owner in the share, possibly, will be lower, than the owner, and above believed, than the investor thought. In an ideal, of course, these two parties are capable to do together that any can’t separately do: 1) the enterprise is capable to grow quickly enough after reception of investments that compensates loss of a certain part of the property; And 2) the investor gets high profit as compensation for the undertaken risk.
The investment into cooperation management enterprise can be produced in the direct form, for a certain share fraction that doesn’t assume the fixed annuity payments. It will be more probable, however, that it is made in the mixed form — granting by the investor of the loan with any percent under a debt obligation and reception of preferred stocks by it. In that case annuity payments will be produced by analogy to a bank loan, but to higher percent (that question on non-presentation of guarantees!). Debt obligations can be converted in the shares of the enterprise which are not belonging to the investor, ensuring, thus, certain safety to the investor. Annuity payments under such loan are established by the agreement.
The days when governments have been flooding people with all types of grants are over. At least for a while. But that does not mean that one must get rid of the idea of getting small business grants.
Everything is doable with wise attitude; small business grants including.
Go to this blog for more practical tips about grants, how to apply for grants, grant examples, traps and ticks of the grants. This info will help you to get small business grants or any other grants faster.