Friday September 7, 2012 10:18
Through worldwide venture capital, many business ideas all over the world have been implemented. Innovators with brilliant ideas have been able to implement them. This is because they can access the much needed seed capital. This new mode of financing is responsible for the development of a number of start ups. Such investments have a high degree of risk.
One may wonder why venture capitalists risk too much by going into risky investments. They do so with the aim of gaining in the future. They are usually given some stake in these companies. Once the companies go public, they are in a position to sell off their share stock at highly favorable terms.
Without project funding, newly founded corporations would find it difficult to thrive. With the absence of a credit history, financial institutions would be very reluctant to avail funds to such organizations. Without these funds it would be next to impossible for such businesses to run. Over the years venture capitalists have filled this void. They do this in return for a significant controlling stake in the affairs of the company.
Looking at the economy at large, this mode of financing has a positive impact. Each time such deals are pushed to fruition, new jobs are created. These are jobs that go a long way in solving the problem of unemployment. Startups are also better placed to access expert advice from their financiers. In the market, such services are very expensive.
Specialization has been favored by most economists. This sort of arrangement promotes this idea. The financiers focus on sourcing funds required to run the businesses while those who come up with the business ideas implement them. This largely improves on productivity. It also allows individuals to concentrate on doing activities they are best suited to perform.
An example of an industry in which project finance lenders have left a mark is the technology industry. The investments involved are risky investments. However, investors have had the courage to invest in them. Eventually, the returns have turned out to be good since vibrant technology based companies are developed.
Considering all the mentioned facts, worldwide venture capital is important for businesses. With it new companies continue to grow. However, there are investments that go awry. This is because risk is an inherent part of any investment. As such any financier should fully assess the risk situation before investing.
AAY Investments Group offers great prices on project finance lenders. Check out their website to learn more! (http://www.aayinvestmentsgroup.com)
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Source: http://www.guldsilverlink.se/a-description-of-worldwide-venture-capital.html
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