If you are not well versed about what is venture capital, then let us help! Venture capital (VC) is one type of equity financing that provides capital to businesses. Typically, venture capital financing involves investing in startups or promising new companies with the hopes of turning a profit. In return for the money you invest, you receive equity in the company – giving you an ownership stake in the business.
Who Should Apply For Venture Capital Funding?
It’s a big advantage for startups to receive VC funding (Seed, Series A, Series B funding, and so on). VC funding can also be a kind of business expansion capital as it not only injects large amounts of cash but also opens doors and creates opportunities for business expansion and development, establishes strong links, and improves market position. Venture capital is a financial investment that helps businesses grow and expand. It is frequently used in combination with other forms of investment, such as angel investing or seed investing, to provide companies with the money they need to grow their business and reach new heights. Venture capital funding is an alternative way for businesses to raise money.
Here are a few things you should know about VC funding:
- Venture capital funding can be useful for early-stage companies that have yet to secure significant funding through traditional means, such as bank financing or angel investors. Venture capital funding comes in a variety of forms, including convertible debt, equity, and other types of convertible instruments.
- Venture capital funding can be a useful option for startups that need to take on extra risk and are unable to secure traditional bank financing because they have yet to prove their business model, and generate revenue.
- Venture capitalists invest in ideas that they believe will have a high chance of success, and some of these organizations will become famous for launching revolutionary products and services that revolutionize their industries. When these ideas are successful, venture capitalists can make a lot of money in a short time.
- Venture capital funding is also used by companies looking to grow rapidly. These startups may need capital for product development or initial production runs, and venture capitalists can provide this type of funding. Venture capital funding typically comes in the form of loans or equity investments, with the investors seeking a return on their investment. Venture capital funding is typically reserved for innovative startups that can prove they have great potential. If your idea doesn’t fit this description, you should consider more traditional sources of financing.
When Should you not Apply for VC Funds?
When you need funds to meet your working capital needs, you should not apply for VC funds and lose equity. Such needs can be met by new-age financing models like – revenue-based financing where you keep complete control of your business.
Revenue-based financing companies like Velocity are pretty popular among e-commerce and D2C founders. They provide equity-free funds up to 4 Cr. To e-commerce businesses with healthy revenue streams. Since the repayments are based on the revenues generated by the business, in a low month you end up paying less. You can apply for revenue loans and get a term sheet in 30 sec.
If you are a business that needs large capital to fund R&D or expansion into new geographies, VC funding is for you but if you are a business needing capital for your working capital needs, revenue-based funding is the way to go.