Week 8 Question 1 Venture Capital - Assignment Example

Venture Capital •Based on your research conducted from the activity/internet above, evaluate the business decision to use a venture capitalist to raise funds, indicating whether or not you believe the company will benefit from this decision in the long run. Provide support for your position. Castlight Health Inc. is an IT healthcare company that offers customers with web based software used in getting information regarding medical costs so that customers can make better choices. In its effort to improve transparency to the various costs of medical procedures, the company was facing the challenge of raising funds because it was such an expensive exercise.

The company was making plans of launching new products and required a significant amount of money and venture capital was the best option for the company (Metrick & Yasuda, 2010). The venture capitalists that funded the operations of the company were mainly from the field of healthcare. Castlight Health Inc. stands to gain from the venture capital because it is yet to go public and at that time it would have expanded its operations which translate to higher profits. •Assess the challenges for businesses using the resources of a venture capitalist, given that significant returns on the investment are likely to be impacted by the firm.

Indicate how a business can manage these expectations. Provide support for your rationale. The main disadvantage of venture capital is that it requires a very short time in generating cash. This puts a lot of financial pressure on the company and this may interfere with its daily operations. There is also the element of loss of control because the venture capitalist has made significant financial contributions in the operations of the company (Haislip, 2010). They venture capitalist may insist on appointing a representative on the management of the company.

However, the business can manage the challenges by drafting an agreement to a number of restrictions as part of the deal. This includes the amount of cash to be paid and the number of people to be involved in the management team (Gladstone & Gladstone, 2002). ReferencesGladstone, D & Gladstone, L. (2002). Venture Capital Handbook: An Entrepreneurs Guide to Raising Venture Capital. New York: FT Press.Haislip, A. (2010). Essentials of Venture Capital. Chicago: John Wiley & Sons.Metrick, A & Yasuda, A. (2010). Venture Capital and the Finance of Innovation.

Chicago: John Wiley and Sons.