There are also others who prefer investing in distribution services. The types of business this venture capitalist invest in usually define their contribution to that business by the cycle of venture through its different stages of growth. This can be either initial financing, second stage, or leveraged level. Other venture capitalist has the preference of placing their investment during the startup level of a company where potential return on investment is probably high and so is the risk. Others prefer the second stage of a company growth for the purpose of expanding the venture or during the bridging level where they provide capital for the expansion of the business until it becomes a public company.
1.1 What is Venture Capital? Venture capital is a segment of private equity industry, which focuses on early-stage, high-potential, start-up companies. The venture capital fund earns money by owning equity in the companies it invests in, which usually have a new technology or business in high technology industries, such as biotechnology and IT, however with high risk. Funds are typically established as limited partnerships, which is a contract between institutional investors who become limited partners and the fund manager. The basic intermediation structure of venture capital and private equity funds is graphically summarized in Figure 1.
However, if one is an entrepreneur and starts their own business; they set their own schedule as well as make their own demands. What is done by an entrepreneur is set by the entrepreneur giving a sense of freedom. 2. Set Your Own Earnings As a business owner, one has the ability to set their own wage and make an investment in their own company. As an entrepreneur, one gets to receive a lot of benefits from the work that is done.
2.2.2. VENTURE CAPITAL Venture capital funding includes investments from various sources like venture capital firms, corporate venture capital units of large industries and investment banks who are interested in gaining equity stakes in entrepreneurial ventures which has high growth potential. Only a very small portion of entrepreneurs meet their funding criteria’s because venture capitalists only support high growth enterprises that needs large amount of initial capital. As a result the funding by venture capitalists represents only a small percentage of total capital invested in entrepreneurial business. Venture capital finance is an expensive solution for new entrepreneurs due to their high agency costs associated with due diligence.
Entrepreneurs should think critically in order to come up with new ways on how to operate their businesses. Being an entrepreneur, you will be facing many challenges and you should be able to with them. For instance customers may not like your products or service you offered, so you should be able to cope with this. You should have some ways of how you will make people start liking your products or service by modifying your products, adding value and able to produce differentiate products unlike for your competitors, because of this you will attract more customers. An entrepreneur is able to promote his business in different ways apart from his competitors.
An entrepreneur supplies risk capital as a risk taker, monitors and controls the business activities. The entrepreneur is usually a sole proprietor, a partner or the one who owns the majority of shares in an incorporated venture. Entrepreneurship
The companies have two ways to get money to start up a business or to grow up their business. Debt financing; such as long-term loans the company gets from the bank. Equity financing is private investor money that the company gets in exchange for a share of ownership in the business. Advantages of
Customers become active participants, and together with the companies they uncover new ideas and solve business problems. From this revolution in the investment landscape, new ventures emerge with the ambition to reach for customers and investors on a global level. Since new firms seldom have a stable cash flow to ensure regular interest payments, they cannot access either equity or debt finance. Therefore, a creative solution to generate capital to fund a project has emerged in the shape of the young phenomenon crowdfunding. Crowdfunding is a method of raising capital for ventures and start-ups, by collecting relatively small amounts from a large public.
Entrepreneurship is the process of generating new ideas and introducing it into the market in the form of a new product, service or a process. It gives rise to entrepreneurs who are dynamic and flexible and introduce a new business from the purpose of being successful. For example, Sachin and Binny Bansal, the proud owners of one of the biggest e-commerce giant “Flipkart” are big entrepreneurs who have become so successful with their abilities of self-confidence and risk taking with proper planning and execution. When an entrepreneur has a new idea and his/her intention is to bring it into the market with a new business venture, the key for success is the good idea and a very good plan to execute that idea. Not only this, an entrepreneur also needs a proper business plan for more clarity about what is to be done when.
Gartner, W. believes that the entrepreneur is part of the complex process of new venture creation and research entrepreneur should focus on what they does. Entrepreneurs often proceed with a very different order of questions compared with administrators. Therefore, someone who discovers and identifies the opportunities is not necessarily an entrepreneur. It is very important to capitalize the opportunities. So entrepreneurs are identified by a set of behaviors which connect them with organization creation.