A venture capital investment is a professional relationship between an investor and a booming company. The agreement usually comes from venture capital firms who specialize in building high risk financial portfolios. They willingly give funding to start-up companies in exchange for equity. This type of relationship is most common in technology industries. You may also see business investment agreement examples.
The person who deals with venture capitals is known as a venture capitalist. These people usually work for a venture capital firm.
Although venture capital may sound similar to loans, they are actually very different except for the fact that they are both common methods of funding a business. With loans, a lender gives a company money, and that company will have an obligation to pay the lender back the amount he gave, plus the agreed interest that will accumulate the longer the debt is unpaid. You may also like small business investment agreement examples.
Sometimes the loan is even backed with assets, such as equipment or property, and other receivables to be surrendered should the company be unable to pay back the loan. However, for smaller companies with considerably smaller loans, the loan is simply backed up by a personal guarantee from the business owner. This “backing” of some sort allows the lender to recover even if the borrower fails to make payments. You may also check out equity investment agreement examples.
Venture capitals, on the other hand, gives the start-up business a chance to issue private shares in exchange for money. This means that the money that the venture capitalist gives to the owner of the start-up becomes a partial owner of the business. This type of “money lending” is only used with high growth industries where there are more risks associated with the general agreement.
For venture capitals, there will be no assets to back up the loan, which means that, to avoid monetary default and create a higher chance of investment success, both parties must agree to higher payouts to result in higher success rate for the business. You may also see restaurant investment agreement examples.
