Advantages and Disadvantages of Venture Capital Funding

Venture capital is the capital investors put on startups which have a high chance of growing exponentially in the chosen market. There are factors that make it advantageous to choose venture capital as a source of funding for startups while there are those that make it disadvantageous undertaking.

Advantages

Provides capital

The capital provided through venture capital funding plays a huge role in financing the start up’s business activities. Due to this the business enterprise limits the amount of funding it would have sourced from other channels.

Expert services

In their bid to ensure that the startup they have funded becomes successful in the generation of profits, Venture capital firms offer a variety of expert business services. These business services include financial management

Disadvantages

Loss of autonomy

The substantial ownership of the startup automatically goes to the venture capital firm. This creates an implication that the venture capital firm must approve or disprove all the decisions made by the start up for them to be effective.

No long term funding

Most capital venture firms want a return on their money on a short term basis. They therefore cannot be relied on as a long term source of capital for start-up.

References

https://www.thehartford.com/business-playbook/in-depth/venture-capital

http://www.mytopbusinessideas.com/advantages-venture-capital/

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