Venture investments are ... Types of venture investments

Venture investment has helped many companies reach a high level and brought a lot of money to investors who believed in young and talented specialists. But this does not negate the fact that this activity inevitably involves high risks.

Venture investment and venture business

Such investments can be characterized as investing in a particular company, project or idea, which are at the very beginning of their development and implementation. Of course, such investment involves high risks. But at the same time, many investors are ready to act, since in case of successful development of the project they will receive significant profits.

We can say that the risk that accompanies direct venture investments is proportional to the level of possible income.

As a rule, progressive developers or beginning businessmen form an actual idea, which in the future can bring a very high income. But, as often happens, they do not have the necessary tools to run the project. In this case, start-ups turn to investors, presenting their idea. Individuals who agreed to finance a risky project with a vivid prospect become co-owners of a newly formed company.

So venture investments are one of the ways to earn quick and risky money. At the same time, it is possible to purchase shares of a company that recently entered the stock market. There is also a calculation that the value of securities will grow significantly over time.

Types of venture investments

In principle, it is logical to distribute the varieties not by the investments themselves, but by the companies that claim them.

You can start with a startup. It is a company formed recently and, accordingly, does not have a long market history. Such organizations are in need of funding, due to the lack of funds for research and the organization of subsequent sales. Venture investments in start-ups are one of the most popular destinations.

Investing in a project that is at the level of an idea. In this case, there is also a need for additional research and testing to create pilot product samples before it is introduced to the market.

Investments can attract those companies that are already fully functioning, but are experiencing a crisis of funds needed to expand sales and production. Financing is often used to increase the fixed assets of working capital or carry out marketing research.

Another object of investor interest can be an organization with finished products, but at the same time being in the initial stage of commercial implementation.

As you can see, venture investments are a very popular direction of investment.

Venture business

Under this term, it is worthwhile to understand investments, which in most cases have the form of share capital. It is invested, as a rule, in fast-growing enterprises, which demonstrate considerable potential. Such funds are often aimed at the implementation of topical technological innovations.

Such financing is focused primarily on the commercialization of scientific research results in high-tech and knowledge-intensive areas. Prospects for such investments are not guaranteed, and the risk is, of course, significant.

In this case, venture investments are the type of financing in which investors are not focused on receiving dividends. Their goal is to sell their stake in the company after its market value is high enough.

As for the sale of such a stake, it can be placed on the open market. Buy it is capable of another company developing in the same area. It is not excluded the interest of business partners, who will be happy to increase the percentage of their investments within a particular project.

Entry threshold for investment

In order to understand the essence of venture investments, it is worth considering the mechanism of their action, which may have certain features. One of them is the high entry threshold.

We are talking about the following fact: for venture investment, at least 10 thousand dollars, and in some cases, several million. Therefore, those who have a couple of thousands, consider such a prospect there is no sense.

But at the same time there is an alternative for those who have little money and are willing to risk them. Such an opportunity is provided by co-investment institutions or funds. Each such fund has a manager, whose activities are reduced to the accumulation of funds of small investors and their subsequent investment in a prospective project. Risks do not become less.

A tangible and obvious minus of such a scheme is that all participants of the fund are forced to rely on the manager's competence, not being able to make their own decisions.

The lack of control and a long horizon of investment

Another peculiarity of venture investments is that none of the persons financing the project seeks to have a controlling interest, nor does it manage the company. The only thing they agree to is the risk of losing investment. As for the responsibility for the development of the project, it falls mainly on the shoulders of top managers. But if the company develops rapidly, and investors fix the wrong, in their opinion, the boundaries of the strategy, they can become a director for personal control of the organization's activities. But this is, rather, an exception than the rule.

As for the long horizon of investing, we are talking about the lack of possibility to withdraw the invested funds at any convenient moment. This is due to the fact that almost always the project absorbs the full amount of investment, and you can get them only if the company can keep on the market. Initially, it is worth noting that some companies may need several years to enter the stock market from the day of launch.

Lack of guarantees

Venture investment is a type of investment in which players receive either everything or nothing. This means that after the fact of financing, an investor can wait years until the company develops and, as a result, sell its stake for several million dollars. But there is a risk that after a long wait the project will be unprofitable and all investments will be lost. In the overwhelming majority of cases, the real profit volume of the startup participants can be determined only after the company's shares are publicly placed on the stock exchange. As a result, the company's share price will determine its investment attractiveness.

The situation in Russia

If we consider Russian venture investments, then it should be noted that this direction of financing can not be called particularly popular in the CIS. Initially, even the most promising projects within the Russian Federation were invested primarily by foreign investors. But at the moment, Russian venture funds have already formed , which are developing this type of investment. For example, OAO Russian Venture Company, along with the REVI association, constantly monitors various funds and provides qualified assistance in their development.

Various specialized presentations, forums and exhibitions are organized for these purposes.

Conclusion

Venture investment is certainly popular in the world, as it allows developing to bright companies and often brings fabulous incomes. But it is worth remembering that many investors have lost the money invested in seemingly promising projects. Therefore, we can conclude that this path is for experienced businessmen.