What is a venture business

The venture business got its name from the English word "venture", that is, "risky". In other words, a venture business is a risky business associated with scientific and technological investments.

For the first time, a venture business was formed in Silicon Valley, as in the US innovation and technology center. Gradually, it spread to most developed and developing countries of the world. Venture business allows you to effectively develop and use high technology for the benefit of the country's economy. It is thanks to venture capital investments that the country can remain competitive in the field of innovation and high technology. Under the venture capital business, they understand a special form of investment that is fundamentally different from bank lending. Investments are most often made in small companies, private or privatized, whose shares are not exposed on the stock markets and are owned by the company's shareholders. Venture investments are made: • in exchange for the shares of the invested company, • as a medium-term loan on special conditions, with a loan term of 3 to 7 years, • a combination of these methods. It is necessary to distinguish venture investments from strategic partnerships. Venture does not imply attempts to acquire a controlling stake and take over the management of the company. The task of the venture investor is not to gain control over the company, but to stimulate company management to develop the company through the investments received and, consequently, to increase financial performance. The venture business aims to maximize the company's profitability, the growth of its quotes in the market. At the same time, it is precisely in the financial sphere that the key risks of venture investment lie. By investing, an investor always risks to a certain extent that the work of the managerial staff will be ineffective. As a result, the investor loses invested funds. On the other hand, with a successful investment, in 5-7 years, the investor will be able to sell the acquired shares at a cost many times higher than the initial one. Venture business is beneficial for both parties to the contract: the entrepreneur on favorable terms receives capital for the further development of his company, the investor - financial benefit, of course, provided that the investment object is selected correctly.