Venture Capital is an investment operation that allows companies, especially new ones, to have access to the economic resources necessary to finalise a business idea.
Characteristics of the financing:
Unlike traditional bank financing, Venture Capital financing allows greater flexibility for operators and fewer constraints (for example, there is no interest nor a precise deadline for repayment).
Venture Capitalists bet on the business idea, usually with high remunerative potential, with a share in the capital and management of the company for a medium-long period of time, until they can proceed with disinvestment with relative gain or to a listing on the stock exchange of the company.
Venture Capitalists, therefore, actively participate in company management and also bear the risk of a project failure and a “0” disinvestment.
There are different phases of corporate life where Venture Capitalists can insert themselves, from the early stages of conception (seed-financing) to the most complex corporate restructuring operations (replacement financing).
Implementing Venture Capital funding.
Preliminary to any Venture Capital funding identifies the individual or company that is willing to believe in the project or is interested in developing the business.
At the same time, the research and identification of the investor are carried out.
A good analytical Business Plan must be drafted, which includes and details every phase of the project with the related cost centres and implementation methods.
The Business Plan must also detail the characteristics of the product/service and how this is positioned on the market.
After carrying out the two basic steps, with the help of a lawyer with business expertise, it will be possible to draw up a Letter of Intent and a Non-disclosure agreement to precisely define the parties’ intentions and the confidentiality of the negotiations underlying them.
The investor will then provide its own Due-diligence to verify the various aspects of the company and the investment from an accounting, legal and commercial point of view.
Once all the aforementioned procedures have been completed, the Venture Capital contract is signed; this document contains all terms and conditions of the investment agreement.
The final phase of the operation is represented by disinvestment. Investors dispose of their investment through a placement operation on the market, hoping to generate a profit.
Venture Capital is, therefore, an operation with enormous potential and with few risks for those who benefit from it.