Week 9 Lecture 9 – Chapter 20: Raising Capital
Venture Capital (VC) Market (20.1)
Venture capital refers to such type of equity capital which is invested in the starting stage or
in expansion stage of a firm. This type of investment is known as very risky type of
investment but due to very high potential of growth venture capital investors take such high
risky investment decisions.
As we know that in the starting stage of any business, firm face problem of finance that is
why firm offer very high returns but due to high chances of failure very few bold & risk taker
investors make investment in such start-ups and expansion plans that is why these investors
are known as venture capital investor.
Generally do not want to own the investment forever
• Taking the investment public.
• Selling the investment to another company.
Stages of Financing in VC Market
1. Seed-Money Stage: Prove a concept or develop a product.
• This refers to the financing for the ideas for new development of product & service. In
other words we can say whenever a businessman contact potential investors for
getting finance on the basis of their new innovative ideas so that further business
activities can be carried out. Hence it is initial stage of requirement of finance.
2. Start-Up: Marketing and product development expenditure.
• In this stage businessman contact potential investors with a solid plan for getting
finance so that some advertising and marketing work can be done to attract potential
customers. Although no sale of goods & services is made in this stage but some
more market research can be done with the help of finance.