How To Get Money To Start A Business

Did you know about venture capital for a startup business? Get to know before you start a startup business, who knows can help you in running the business. The following reviews will be discussed by my finance team.

Understanding Venture Capital Companies

Is a non-bank financial institution that dares to invest where the investment contains a high risk. This decision is made with a variety of considerations of course and this is in accordance with the intent and purpose of the establishment of the company, which is investing in a business that contains high risk.

Peter Thiel writes in his book "Zero to One" stating that venture capitalists seek to identify, fund and earn profits from promising new companies. They collect money from institutions and wealthy people, then put them in a container and invest the money in technology companies that they believe will increase in value. The profit they usually take is 20%. A venture fund will make a profit when companies in its portfolio become more valuable, then go public or bought by big companies.



Bank Differences with Venture Capital Companies

The difference between a bank and a venture capital is the type of activity, where the Bank finances an activity but does not enter into the company it finances, whereas venture capital provides financing by way of direct participation in the company it finances.

Therefore, the difference in venture capital with the bank in the case of its inclusion directly venture capital is a high-risk financing. Generally, venture capital financing is almost always accompanied by a requirement of involvement in the management of the Couple Company normally agreed in the agreement. However, the period of participation is temporary between 3-10 years.

Purpose of Venture Capital Establishment

Broadly speaking, the purpose and objectives are as follows:

For the development of a particular project, such as a research project, where the project is usually devoid of profit, it is for the development of science.

Development of a new technology, or new product development. Financing for this business only gains in the long term.

A takeover of a company's ownership. Financing objectives with the acquisition of other companies' business owners are more directed to seek profit.

Poverty alleviation partnerships, with the aim of assisting weak entrepreneurs who lack capital, but have no material guarantees making it difficult to obtain loans. With the participation of capital from venture capital will be able to help face financial difficulties.

Transfer of technology to companies that still use the old technology so as to increase the capacity and quality of production.
Helping companies that are lacking liquidity.

Assisting the establishment of new companies, where the level of risk of loss is enormous.

Advantages:

Is a relatively short and medium-term funds and a flexible repayment system.

It is a source of funding for new companies that are not yet eligible for funding from other sources of financing.

The management assistance provided by the Venture Capital company to the business partner company usually contributes to the company's progress.

Typically Venture Capital companies are very focused on going back and forth, so the business of partner companies is always monitored.

The addition of new capital can improve the company's ability to obtain loan/capital assistance in other forms

Pamor company's business partner to go up considering Venture Capital Company is usually easy to have a good reputation
PPU (Business Partner Company) can expand its business network through a new partner owned by Venture Capital Company.

Because this financing is generally given to small companies, it is
one of the efforts to raise and protect small entrepreneurs and expand employment opportunities.


Weakness:

When viewed in terms of long-term financing through venture capital can be very expensive because of the profit sharing system applied. Returns earned by a venture capital company from a business partner are huge, especially if the business is successful.

Financing assistance through venture capital can only be provided to certain companies effectively. Companies with excellent prospects that can be served in practice more companies are rejected than those received.

The founders of a business partner company financed by a venture capital company may lose control and ownership of the company because of the management and shares held by the venture capital firm.

Types of financing by venture capital firms include:

Equity financing is a type of direct financing. In this case direct participation in the Company's Business Partner (PPU) by taking part of a number of shares owned by PPU.

Semi equity financial, which is a financing by buying convertible bonds issued by the Couple Company.

Established a new company. In this case, the venture capital company together with the PPU established a new business altogether.

For the results, this type of financing is a financing to a small business that does not yet have a legal entity form Limited Liability Company (PT), but it is not possible to the legal entity PT if both parties want each other.


Venture Capital Can Be Your Choice

Peter Thiel states that the biggest secret in venture capital is that the best investments in a successful funding agency, as great as even beat all other funding entities. If you are in the business of establishing and developing a startup company, there is nothing wrong to get funding from venture capital.