Venture capital(VC) is investing into the ideas of start up/small companies in which the investors believe a potential growth in future. VC is similar to private equity(investing into firms which are not listed in exchanges) and is often funded by a partnership firm of limited liability or investment bank or any other financial institutions and the investor is called as venture capitalist. Venture capitalists pledge their funds in exchange with the equity of the company and so they have rights to make decisions regarding company matters. Capital may be invested into the firm at seed or growth stages. The company do not return the investment to the venture capitalists and the capitalists will be benefited once the firm goes into public through IPO(Initial Public Offer) and so they earn good returns.
VC is an investment in to small companies which has incorporated life of less than 2 years. Where as private equity is investment into well known companies with good finance system and have a great probability of higher returns. VC deals only with equity and Private equity deals with both equity and debt.
AUTHOR – AKHILA VEMIREDDY
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