Venture capital and investment: introduction

So in these series of articles we are going to find out what is the venture capital, how we can use it for advantage of our business and what it can give us, so let us start now.

Venture or risk capital is an obscure phenomenon for the overwhelming majority of people and also beginning businessmen. It is confused with bank crediting or charity. Information on character and activity of venture capital trusts and the companies practically aren’t present, not including several confused notes in the newspaper editions. The retrieval systems in Internet give all pair-three references to sites where the word a venture which thus doesn’t cease to remain vague and not clear is anyhow mentioned.

The name of the venture occurs from a word risk, venture or undertaking. (Remember, during an epoch of reorganization cooperation management enterprises also were referred to as joint ventures that, probably, would be more correct to say as joint brave undertaking.) The term brave means that in mutual relations of the capitalist-investor and the businessman applying for reception from it of money, there is an adventurism element. And it is actually so. Brave (venture) investment, as a rule, is performed in the small and average private or privatized enterprises without granting of any pledge by them or a mortgaging, in difference, for example, from bank crediting.

Venture capital trusts or the companies prefer to invest the capital in firms whose shares don’t address on free sale in stock market and are completely allocated between shareholders – physical or juridical persons (unquoted or unlisted companies). Investments go or to stockholder equity (equity investment or financing) the closed or open joint stock companies in exchange for a share or shares block, or are given in the form of an investment credit (debt financing), as a rule, medium-term to the western measures, for the term from 3 till 7 years.

The interest rate under such credits either isn’t established, or constitutes LIBOR + 2 – 4 %. (LIBOR – London Interbank Offered Rate, it is literally – the London interbank rate of the offer – the average rate of percent on which banks in London give loans against placing at them deposits. The information on its fluctuations is published by Financial Times proceeding from the average rate on 3 and to 6 monthly dollar deposits in the size in $10 million on 11 o’clock in the morning of each business day, considered by five banks.

In practice, however, most often there is a combined form of venture investment at which the part of means is brought in stockholder equity, and another – is given in the form of an investment credit.

It is very reasonable that government, despite this crisis is not leaving to assist small businesses. And small business grants can be a real helper right now.

But, surely, you should understand that today the fight for small business grants as well as for other kinds of grants is harsher. This is natural – more businesses need them. So before you start your fight for the small business grants, please check out this blog for more
details about grant industry.