VC is venture capital financing, in that companies or individuals invest into companies when they are just a concept and invest into the company. There are five stages and VC’s invest in the five stages of financing which are seed, start up, second, third and bridge/ pre IPO stage which is when the investors exit the firm through IPO (initial public offering).
It is a very good career line for a chartered accountant because of the following reasons:
- Business expertise. Aside from the financial backing, obtaining venture capital financing can provide a start-up or young business with a valuable source of guidance and consultation. This can help with a variety of business decisions, including financial management and human resource management. Making better decisions in these key areas can be vitally important as your business grows.
- Additional resources. In a number of critical areas, including legal, tax and personnel matters, a VC firm can provide active support, all the more important at a key stage in the growth of a young company. Faster growth and greater success are two potential key benefits.
- Venture capitalists are very well connected in the business community. Tapping into these connections could have tremendous benefits.
There are various disadvantages also:
- Loss of control. The drawbacks associated with equity financing in general can be compounded with venture capital financing. You could think of it as equity financing on steroids. With a large injection of cash and professional—and possibly aggressive—investors, it is likely that your VC partners will want to be involved. The size of their stake could determine how much say they have in shaping your company’s direction.
- Minority ownership status. Depending on the size of the VC firm’s stake in your company, which could be more than 50%, you could lose management control. Essentially, you could be giving up ownership of your own business.
Written by Jyotsna Singh
Finance Intern at CA Learning
To know more – http://calearning.com