Venture business. What's this?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The term "venture business" appeared as a result of the translation of the English word "venture", which means a risky undertaking or enterprise. This type of business is focused on the use of new technologies or the results of scientific achievements in practice.

Venture business as a form of investment in Russia began its development relatively recently, but its main players and directions of development have already been clearly defined. He is mainly engaged in the transformation of scientific and technological achievements, from the initial idea to the introduction of this technology into mass production.

Features of venture business

Venture venture is closely related to innovation, but its activities do not necessarily include innovative technologies. For example, it can be the introduction of a venture project into new markets. But at the same time, ideas and new inventions will remain unrealized without venture financing, since all activities related to innovation are very risky. Only the organization of venture business gives investors the opportunity to getprofit far exceeding the initial investment.

Different from traditional activities

Venture business is primarily distinguished by the fact that its financing is carried out without guaranteed collateral. The necessary funds are provided only for a promising idea. In this case, the collateral is a predetermined share of the shares of the venture company.

If the business of the established company goes well, then at a certain stage the investor will be able to sell his shares and not only return the invested funds, but also get a quite acceptable profit. If the project fails, then the investor will be able to claim only a certain part of the company's assets, depending on his share in the authorized capital.

But do not think that investors do not take into account business risk when financing venture projects. On the contrary, they plan to receive a considerable return on their investments, many times higher than the interest of bank deposits.

Of course, venture capital involves some risk, but a reasonable investor would never invest in a losing venture.

Funding

An investor, financing a venture project, does not count on a quick profit, the contract is concluded on a long-term basis. He plans his exit from the project in advance. Therefore, the enterprise must be prepared for such a development of events so that the withdrawal of funds does not affect its operating and financial activities.

Investor puts forward specialrequirements for the project team. Very often, money is allocated not so much for an idea or project, but more for specific people.

The benefits of such a project:

1. Venture business helps to raise the necessary funds for the implementation of risky but promising projects when other sources of financing are not available.
2. Money for the project is allocated without collateral.
3. Funding is being done on short notice.
4. This type of investment does not involve the payment of interest, dividends, etc.

Flaws:

1. Very difficult to find and interest investors.
2. The investor needs to allocate a share in the authorized capital.
3. An investor can exit the project at any time by selling his shares to a third party.