Definition of Venture Capital Fund

The concept at hand is a specialized term from the economy and, more specifically, in the field of business financing. The term capital fund risk It is known internationally by its name in English, equity fund or private equity.

When a company is constituted it is quite common that problems are faced for its adequate financing, since banks finance companies that are already established and have a track record that supports them. For a company to finance its draft without resorting to banking traditional You can contact one type of investor, venture capital investors, who have funds destined to finance projects with a certain risk since they are in their initial phase.

Venture capital funds are usually owned by private investors. However, there are also these funds with public ownership and are used to finance innovative projects and with not exclusively economic criteria. In this sense, some municipalities have venture capital funds to help finance companies with some unique characteristics (for example, those that represent a change in the production model and that present aspects innovative).

The concept of a venture capital fund and its characteristics

A venture capital fund is an alternative financing and is interesting for new companies or those that are not eligible for conventional bank loans. A venture capital fund entity becomes a shareholder of the company in which it invests and usually its participation it is temporary. The objective of the acquisition of the shares is to contribute to the expansion of the company and if it makes a profit the venture capital fund can start to recoup its investment by selling the Actions.

The venture capital fund manages the money of some investors and finances those projects that it considers attractive. In general, shares of companies are bought in their initial phase (known as the seed phase), at the time of growth or expansion or in the context of a change in business. strategybusiness.

From an investor point of view, venture capital funds are an alternative to investments traditional stock exchanges and represent a way of diversifying investments. It must be taken into account that venture capital entities have direct access to the information of the companies in which they invest and this element can be attractive to an investor (fund managers of these capitals usually participate actively in the strategy of companies and this aspect is attractive to investors investors).