| Venture capital, a type of equity funding, is | | | | business. When the investor and business owner |
| essentially an investment that combines a life | | | | have misaligned goals, this could translate into huge |
| insurance policy and mutual fund shares. With this | | | | problems. Venture capitalists invest in companies with |
| option, the investor is shielded by the protection of | | | | the most potential to realize extreme growth in |
| the insurance policy (collateral), and also has the | | | | hopes of an eventual sale of the company. If your |
| added bonus of growth potential of the mutual fund. | | | | end goal does not include the eventual sale of your |
| The term equity funding is the exchange of money | | | | company, or there is a chance that you will receive a |
| for a share of business. This allows business owners | | | | nominal return on investment for the sale of the |
| to obtain funding without incurring any debt, but | | | | remaining shares of your company, an alternative |
| there are potential downsides of venture capital all | | | | funding option should be considered. |
| entrepreneurs should be aware of. | | | | Another misconception is that venture capital is |
| Venture Capital Myths Dispelled | | | | somewhat easy to receive. It takes time to contrive |
| Many startup companies in search of funding often | | | | an affective funding proposal and to find investors |
| consider venture capital as a feasible solution-but this | | | | who are actually willing to read and consider your |
| is often not the best choice. While venture capital | | | | proposal. Despite the substantial amount of time |
| may be viable for some businesses, there are many | | | | spent on the funding proposal process, the majority |
| factors to take into consideration prior to deciding to | | | | of businesses never actually receive venture capital, |
| use this type of funding. | | | | because in spite of how innovative your business is, |
| When in search of business funding, the end goal of | | | | venture capitalists have very high expectations and |
| obtaining funding is often the only factor given | | | | aim to ensure high yields on their |
| consideration. More importantly, business owners | | | | investments-sometimes 30 percent or higher. This |
| must realize that the method in which funding is | | | | brings us to the high cost of venture capital. Unlike |
| obtained will have both positive and negative | | | | debt funding, there is no amount that must be |
| short-term and long-term consequences, depending | | | | repaid, but with a 30 percent return on investment, |
| on the ultimate end goals. As previously stated, | | | | along with salaries and bonuses, venture capital |
| venture capital is typically invested in a company in | | | | becomes very expensive. While this money may not |
| exchange for shares in said company. Depending on | | | | necessarily be coming from your wallet, it is coming |
| the amount of capital received, that could mean the | | | | from somewhere-your business. |
| business owner loses ultimate control over the | | | | |