THE PROS AND CONS OF VENTURE CAPITAL Funding
Roman Semiokhin, serial investor and entrepreneur.
The Pros and Cons OF VENTURE CAPITAL FUNDING
Offering scope for an instant injection of cash into an earlystage business, venture capital funding is an enticing financing option for many business owners. Venture capitalists essentially gamble on the success of the businesses they back.
If the business succeeds, they can win big. However, if the business fails, venture capitalists generally bear their own losses. Unlike with bank borrowing, founders have no obligation to repay venture capitalists, meaning that they do not have debt hanging over their head.
Venture capital can provide a critical injection of cash at just the right moment, enabling business owners to quickly scale their enterprise. However, there are considerable dangers associated with trying to grow too fast too soon, with
experts warning that scaling too early is one of the biggest risks to start-ups and early-stage companies.
Another drawback in relying on venture capitalist backing is that funds come with strings attached, with investors taking a stake of the company’s equity, effectively diluting the number of shares the business owner holds and can offer future shareholders. This could also mean giving away a degree of control over corporate decisions, which many founders are reluctant to do.
Venture capital can provide a critical injection of cash at just the right moment, enabling business owners to quickly scale their enterprise.
ROMAN SEMIOKHIN
To learn more about the various investment channels open to entrepreneurs, visit the blog of Roman Semiokhin.
