Short Essay on Venture Capital

They usually require a seat on the Board of Directors. VCs would not generally take part in the day-to-day running of the company, although provision of management and technical expertise can often be a condition of VC funding.

They commonly act as mentors and a business partners to see that the company grows and succeeds, which is in the best interests of all concerned, including the venture capitalist. Several IT, Biotech and Pharmaceutical Companies have used VC funds very successfully in their initial years. They seek to exit within a period of five to seven years.

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Exit strategies can differ and may include being bought out by the company’s principals, a public listing, or sales of the VC’s shares to a third party at a premium. The strategy needs to be negotiated at the beginning of the VC investment. Most VCs have a portfolio of investments to spread their risks evenly.

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