{"id":2845,"date":"2020-03-23T17:48:45","date_gmt":"2020-03-23T17:48:45","guid":{"rendered":"http:\/\/localhost\/2020\/swoopMW20\/?post_type=knowledge-hub&p=2845"},"modified":"2023-11-30T13:44:28","modified_gmt":"2023-11-30T13:44:28","slug":"venture-capital","status":"publish","type":"knowledge-hub","link":"https:\/\/swoopfunding.com\/za\/knowledge-hub\/venture-capital\/","title":{"rendered":"Venture capital"},"content":{"rendered":"\n
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\n \n What is venture capital? <\/a>\n <\/h5>\n <\/div>\n\n
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Venture capital is financing given to startups\u00a0and early-stage businesses. Venture capital funds look to invest larger sums of money than\u00a0business angels<\/a> \u2013 typically more than R500,000 \u2013 in return for an equity stake. Venture capital is most suited to high-growth businesses with long-term growth potential, i.e. those destined for sale or public listing (IPO).
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You can think of venture capital is a subset of\u00a0private equity<\/a>. VC firms tend to invest in promising startups that need growth capital and business expertise to take them to the next level, whereas PE firms prefer to invest in established businesses that require a cash injection or a new strategy to move them forwards.

Both VC and PE firms share the same aim: to improve the companies in which they invest before selling them on at a profit (typically to a strategic buyer or by\u00a0IPO<\/a>), generating good investment returns for their own institutional investors.<\/p>\n <\/div>\n <\/div>\n <\/div>\n

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\n \n Why choose venture capital? <\/a>\n <\/h5>\n <\/div>\n\n
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Let\u2019s say you\u2019re a startup \u2013 or a new business with a limited operating history (i.e. under two years) \u2013 and you need capital. Maybe you need it to expand, to fund a management buyout or buy-in, or to develop a new product. Venture capital (VC) funding might be your best or only option. A VC fund, also known as a Limited Partnership, usually partners with institutional investors (e.g. pension funds, insurance companies and family offices) to provide finance to companies with high growth potential, in return for an equity stake.<\/p>\n <\/div>\n <\/div>\n <\/div>\n

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\n \n Pros and cons of venture capital <\/a>\n <\/h5>\n <\/div>\n\n
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As with all\u00a0equity finance<\/a>, the appeal (in contrast to a loan or any\u00a0debt financing<\/a>) is that you won\u2019t have to pay interest \u2013 nor will you have to repay any capital. The downside is that you give away equity to your investors, who also get a say in company decisions.

The VC mindset is similar to that of\u00a0business angels<\/a>\u00a0(private investors) \u2013 both are interested in businesses with high growth potential. Investors who are impressed enough by an entrepreneur\u2019s idea or company to give them a VC investment expect to receive a high percentage return if the business succeeds.<\/p>\n <\/div>\n <\/div>\n <\/div>\n

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\n \n Have you also considered? <\/a>\n <\/h5>\n <\/div>\n\n
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