Features of Venture Capital Financing
Under venture capital finance the lender provides financial support to a company which is in early stage of development, though it involves risk but at the same time is has the potential for generating abnormal returns for venture capitalist. Given below are some of the features of venture capital –
1. Venture capital involves not only investing money but also active participation in the management of the company by the person who has made investments in the company.
2. Venture capitalist divests his or her holding once the investments has generated returns in accordance with the venture capitalist desired return.
3. Venture Capital Financing is in the form of equity participation rather than giving it as loan or debt.
4. Venture Capital Financing is usually done for companies which are small level or medium level and also relatively newly formed companies are the preferred choice of venture capitalist.
5. Venture capitalist does Venture Capital Financing in order to make a capital gain on equity investment at the time of exit.