Private Investors
Venture capital investment means the provision of financing to non-listed companies. Venture capital investors invest in companies which they believe to have good development prospects. The aim is to provide additional value to the company, and thus enable increase in the company’s valuation. A venture capital investor does not aim to become a permanent shareholder of the company, but instead seeks to withdraw in accordance with an agreed plan.
Venture capital investment usually takes place in the form of equity financing. This is usually done through subscription of shares, for example in a share issue directed to the investor. Sometimes also convertible bonds and special rights, as well as mezzanine instruments are used as means for venture capital investment.
Venture capital investments can be divided into two categories: investments made in early stage startup companies (venture capital) and investments made in more developed startup companies (private equity). One of the key differences between the above mentioned is that venture capital investments are usually minority investments whereas private equity investors usually aim to own the majority of the shares of the target company.
The value added by a venture capital investment extends often beyond mere financing. A venture capitalist also contributes to creation of strategies, structuring of corporate financing, the work of the Board of Directors, budgeting, marketing, development of management systems and branch knowledge. In addition, the presence of a venture capital investor increases the company’s reliability and, therefore, possibilities to obtain other forms of financing.