Venture,Growth, and Debt Capital - Essay Example

There are lots of ways such as venture capital, growth capital, and debt capital, for an entrepreneur to collect money for his business

Venture capital

“Venture capital (VC) is funding invested, or available for investment, in an enterprise that offers the probability of profit along with the possibility of loss.” (Venture Capital, 2007) Venture capital was once known as risk capital. But the name has confused a lot of investors and it has been changed to venture capital. There is no guarantee of profit through this type of investment. If the business succeeded in making a profit then the investors will also get their share from the profit. If the business makes a loss then the investors may also lose their money proportional to the loss incurred by the business. Venture capital investments are made in the form of cash for shares in the invested company.

Growth Capital

“Growth capital is a funding that allows a company to accelerate its growth. For new startup companies, growth capital is the second stage of funding after seed money.” (Business Definition for Growth Capital, 2009) Growth capital investors will normally select an established company for their investments. Compared to venture capital investors, growth capital investors may have their money more safe because of the maturity of the company. The financial abilities and the market presence of these companies will be much more established than a venture capital-oriented company.

Debt Capital

“Debt capital is the capital, usually money, raised through issuing bonds. Although most of the time the capital raised is money, it could be other goods of value as well. The capital raised must be paid back to those who finance the debt. Both private companies and governments can raise debt capital this way” (What is Debt Capital? 2003) Compared to the other two capitals, venture and growth capitals, debt capital is the safest way of investing. The money collected through the issuance of a bond usually guarantees the amount deposited.

Entrepreneurial Finance

It is the finance usually an entrepreneur collects through different methods or sources such as own resources, family and friends, and also as loans from banks.

Importance of awareness about financial resources for an entrepreneur

            An entrepreneur should have the proper ideas about how to find out capital for the start-up and expansion process of the business. He must have a definite idea about the functioning of venture, growth, and debt capital investments to select the proper strategy for his business future. Moreover, the awareness of these investment options can help him in his personal life also. He can select the proper investment option for his personal savings options and also he can select the correct companies for his investment strategies. Proper knowledge about these terms will help him in evaluating the performances of his company and also other companies as well.