Date : 27/03/2010
Subject : Entrepreneurship Management
Topic : Article Review
Venture capital is a type of private equity capital typically provided for early-stage, high-potential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. Venture capital investments are generally made as cash in exchange for shares in the invested company. It is typical for venture capital investors to identify and back companies in high technology industries.
Venture capital is the term for money invested in young, fast growing companies. Many of today's leading companies were backed by venture capital: Biocon , Google , Oracle, Apple, Google, Paypal, etc .
During the boom period Venture Capitalists invested in companies which generated higher profits and also funded the start ups entering into the financial world, but the crash of the stock market and the economy entering the recession phase posed problems of funding for venture capital firms and the start ups for funding their business.
The venture capital firms invested in many of the marginal businesses in several sectors but after the recession venture capitals funded only the companies having strong fundamentals and companies that had good amount of cash reserves as companies with strong fundamentals may not generate higher profits in today’s scenario but will generate it in future when the economy will enter the booming phase.
The venture capital firms feel that this is not the end there are lot more potential for returns in the market but one should have patience for funding into the companies.
As markets go through ups and downs the only way to survive in this recession is to have patience and invest in good companies by taking this recession as an opportunity to invest and wait for few years for the economy and market to revive from the downturn for receiving good amount of profits.