Venture capital

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Priyanka Agrawal (Querist)
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25 February 2013 Hi All,

I just wanted to know that what exactly is Venture Capital. And who can be a venture capitalist?
Can a Private Limited company invest in Venture Capital?

Thanks!

Ajay Mishra

Ajay Mishra (Expert)
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27 February 2013
Venture capital (VC) is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT, software, etc. The typical venture capital investment occurs after the seed funding round as growth funding round (also referred to as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company. Venture capital is a subset of private equity. Therefore, all venture capital is private equity, but not all private equity is venture capital.[1]
In addition to angel investing and other seed funding options, venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company's ownership (and consequently value).

Yes, a private company can invest in venture capital subject to the approval under section 292 of the Companies Act, 1956.

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Ajay Mishra

Ajay Mishra (Expert)
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27 February 2013 For more details, go to the following link, it may help you:

http://sbinfocanada.about.com/cs/financing/g/ventcap.htm

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