1. Returns of Investment
At some point in their operation, businesses will require
assistance from outside sources for capital. Even those that
are still starting may find it necessary to look for investors
who can provide them with financial assistance to make their
business idea come to life. There are many types of
investors. Some of them are specific about the kind of
businesses they should provide funds with while others do not
pay much attention on the stage of the business they are
funding just as long as they know there is a potential to earn
a decent amount of return to their investment.
For investors, the chances of earning a return of profit is
good because the recipient often guarantees a minimum
return protected by the existing assets of the company. Although there are some potential
advantages associated with this type of activity in investing, choosing to be a venture capital
investor may present some risks and challenges. Companies that have initially showed promise
may instead fail, resulting to at least a partial loss of the invested capital. Aside from that,
venture capital investors may need to wait for years before they start earning a return on
their investment, an element that may be discomfiting for those investors who look for quicker
turnarounds on their investments.
For this reason, an investor who considers this type of opportunity has to ensure they can
afford to absorb some loss and be prepared to work without receiving real returns for extended
time periods. Both venture capitalists and angel investors are excellent source of funding and
many businesses have been grateful for their existence as it provides them with an easier way
of getting the funds they need besides approaching banks and other lending institutions that
have rigid requirements. But in order for a business to convince these investors to supply them
with necessary funds, they should present them with an impressive and attractive business
plan.