What is “venture capital” under business law?

On Behalf of | Dec 28, 2018 | Business Law

Individuals who are interested in starting a business have many important decisions that they must make. One critical issue that they must figure out is how to raise the funds needed to finance their endeavor. This week we want to take a brief look at venture capital and how it can be beneficial to entrepreneurs. Venture capital is money that is obtained from investors and investment banks for the purpose of starting a business. These investors generally take an equity interest in the business with the intent of later selling off that equity for a profit. Venture capital, while usually financial in nature, can come in other forms. Individuals can invest expertise in a number of fields, including the technical and managerial realms, to help a business get up and running.

Many venture capitalists are referred to as “angel investors.” These individuals have a high net worth and are usually experienced in the field in which they are investing. If they are not experienced in the field, then they are usually well adept at investing in general. Before investing in a business, venture capitalists conduct due diligence to ensure that they will be likely to recoup their investment and make a profit. Therefore, entrepreneurs typically need to submit business plans, management strategies and operating histories. This means that entrepreneurs need to be careful about how they present themselves when seeking start up investments. Starting a business can be extremely stressful. There are many matters to consider, including business structure and startup costs. By getting the right information about business law matters, entrepreneurs may be able to better position themselves for a strong start and an increased chance of longevity.


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