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Five different sources of risk capital financing - Research Paper Example

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This is because of the lack of their own resources to raise funds and they cannot access loans. However, many investors are reluctant to invest in start-ups…
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Five different sources of risk capital financing
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Download file to see previous pages One of the most common sources of risk capital financing has been the angel investing. Most small companies that are starting have endeavored to in various online platforms with the aim of raising money. Ordinarily, an angel investor which involves equity finance uses their individual disposable finance to make their personal decision about making the investment. Normally shares are taken by the investor into the business in return for providing equity finance. This is with the aim of not only providing business with money to grow, but also bringing their experience and knowledge to help the company achieve success. This is the most significant source of investment in start up and early stage businesses in search of equity to grow the business and other investments. (Anonymous, 2010)
Another source includes the venture capital. Normally venture capital aims at adding value in addition to the capital, towards the companies in which they invest. This reveals efforts of these investors to help the business grow and realize a greater return on the venture that has been undertaken. Ordinarily, venture capital is a type of equity financing that addresses the funding needs of entrepreneurs and companies that fails to seek capital from more traditional sources that includes public markets and banks. (SBA, 2012)This could be because of size, assets, and stage of development of the business.
As discussed it can be noticed that angel investment differs significantly from venture capital finance that invests in businesses via managed funds that has been raised either through private or public money.Normaly,the venture entrepreneur director will invests the money on behalf of the fund. The capitalist should ensure that the investment is profitable and that it makes returns for the fund’s investors.Normaly,venture capital funds are more risk averse compared with angel investors’ and thus make fewer small investments in start ...Download file to see next pagesRead More
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