Mutual Fund

Venture Capital: Types and Benefits

Starting a Business venture is a difficult and the most difficult task is to collect investment,
However there are various sources to collect the investment, but choosing the best,
that supports your cause and understand the true value of your business is what makes it a difference.
So, that is when Venture Capital comes into the picture, well, in this topic we will understand
“Venture capital: types and Benefits of venture capital”.

Venture capital

Venturecapital is an initial investment made by angel investors into start-up companies,
and SME’s with a belief that they will earn higher returns in the future.
Venture Investors are generally angel- investors, financial institutions, and other Merchant Banks.

Types Of Venture Capital:


  • Seed Money:
    Seed Money stands for the money that is invested in the initial stage of the business,
    to maybe either to start the business into the action.
  • Start-up:
    The amount invested in the business to start the production level or to promote its marketing,
    to enhances its marketing exitance.
  • First-Round:
    Firstly, funding is provided the stage-wise to keep a track of investment,
    Funding for the sake of enhancing productivity in the market.
  • Second-Round:
    Secondly, the second phase is released to fulfill, its operating necessity,
    like buying additional machinery, wages, and paying off expenses, etc.
  • Final Round:
    This is also known as an exit strategy, this is the final phase of investment,
    wherein the company has grown into a high-end company and ready to be
    introduced in the stock market and got approved by SEBI to register under IPO.

Benefits of Venture Capital:

  • Promotes Entrepreneurs
  • Product Promotion
  • Generates Employment Opportunities
  • Helps in Technological Growth
  • Growth of Sick Companies
  • Helps in Upliftment of Backward Areas
  • Strengths in Growth Of Economy


  • Promotes Entrepreneurs:

    A capital Venture influence the growth of the start-up business,
    wherein they hear a business idea and decide either to invest or not,
    which promotes growth in the sectors of business which leads to a higher return.

  • Product Promotion:

    Many of the times what happens, a talented individual or an institution comes up
    with a product that is essential to the society but due to the lack of financial assistance,
    the products never enter into the market.

  • Generates Employment Opportunities:

    It helps in creating business opportunities which will,
    indirectly helps in creating job opportunities for others as well.

  • Helps in Technological Growth:

    Just like in the case of products, there are various technology created,
    but due to non-funding, the ideas become obsolete, however, angel investors
    looks for this kind of innovative ideas to invest in.

  • Growth of Sick Companies:

    Well, there are various companies in the market which become bankrupt,
    the venture investors buy those kinds of companies and help exist in the market,
    the company may be in the condition during but the idea what the company might be unique,
    that is why the venture capital invests his money into such business.

  • Helps in Upliftment of Backward Areas:

    There are various gray areas, the venture capitalist help those kinds of are,
    by investing or by creating a business, which will create various job opportunities,
    which will help the people improve their stand of living.

  • Strengths in Growth Of Economy:

    Well, Venturecapital not only helps in all the above activity,
    but also helps in the economic growth of the country.
    It helps in undermining the new business in the market and also helps in generating
    the profit which will be taxable and will directly help in the growth of economic upliftment.

Disadvantages of Venture Capital:

Well, as we now know there are various advantages to venture capital,
there are few shortfalls to this type of investment let us look into that one by one:

  • Ownership
  • Lengthy and Complex process 
  • Uncertain Form of Financing
  • Long Run Form


  • Ownership:

    Well, the venture capitalist only invest in the idea which will bring him higher returns,
    but at a cost of ownership, the investor holds certain rights to the final go, sometimes
    he deems to have the position of the owner of the company in exchange for the investment
    he has invested in return.

  • Lengthy and Complex process:

    Finding an investor is difficult, if you find one you have t explain to him your business idea,
    and then you have to convenience him to invest into your company and provide a statistical
    evaluation that your business will bring him a higher return compared to other investment options.

  • Uncertain Form of Financing:

    Well, the Venture Capitalist may even be convinced to invest in your business venture,
    but the investors can suddenly decide to stop investing in the companies.
    so, the uncertainty is higher compared to other forms of financing.

  • Long Run Form:

    This form of investment is good for the sake of long term,
    if it’s for sake of short-term it is better to opt for a loan than to find a venture capitalist instead.


In summary, on the whole, we hope the topic “Venture Capital: Types and Benefits” has been helpful
and informative to the readers, not only that but if you are looking it start a business, it is good to find
a venture capitalist but also looking into the consideration on the disadvantages as well.
In other words, “Venture Capital: Types and Benefits” applying for a loan may sound an easy task,
but it is a risk because you have to repay in any case but in the case of venture capital,
he aware of the risk still ready to invest in the business.


[ Read More: The BEST INVESTMENT PLANS For 2021 In India ]


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