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Ecwid Ecommerce Glossary

Venture Capital

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What is venture capital?

Venture capital is a type of financing from investors, investment banks, and other financial institutions provided to startups and small businesses that are expected to have long-term growth potential.

Venture capital is usually provided by investors to small businesses with exceptional growth potential. Sometimes venture capital can be provided in the form of technical or managerial expertise.

Venture capitalists are investors that provide their capital to businesses with a long-term growth perspective. They usually get equity in the company, which means they are involved in company decisions.

What are the pros and cons of venture capital?

Advantages of venture capital:

  • A chance to expand the business
  • Guidance, expertise, and consultation from venture capitalists
  • Access to a business network
  • No obligation to repay investors if the company shuts down.

Disadvantages of venture capital:

  • Major company decisions require the consent of venture capitalists
  • Getting venture capital funding is a lengthy and complicated process
  • Investors may not provide all the funds at the same time
  • Venture capital may not be suitable for a company with a business plan that will take more than 3-5 years to provide liquidity.

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