Inventions and innovative ideas are the main engines of the world economy. On the Internet, you can find many stories telling how Silicon Valley entrepreneurs came to success. However, not everyone knows that success comes thanks to venture investors who were once inspired by an invented idea and believed in it. All phases of the life cycle of venture investing are associated with a high degree of risk, so venture capital consulting can help select and analyze innovative projects.
What Are Venture Investments?
The venture investment market is dynamic. Changing priorities is a normal phenomenon. The world has already entered the 6th technological order, so the role of bio- and nanotechnologies will increase.
Venture investments are long-term investments with an investment period of 3 years or more, usually 5-7 years. Sometimes the stage of developing an innovative project can take several years. The payback period is extended to five years or more.
The amount invested is significant. Usually, the entry threshold starts from 20-50 thousand dollars and can reach several million.
An investor willing to invest in only one startup is called a venture capitalist. At this stage, he needs help in consulting to venture capital funds as he needs to exercise complete control over the company’s activities.
What Are the Advantages and Disadvantages of Venture Funds?
The positives for investors in this direction include the following:
- Potentially many times greater profitability compared to classical short-term investing.
- For owners of several million dollars of capital, this is an opportunity not only to invest but also to take part in the management of a startup.
- Moral satisfaction. Successful venture capital investments give a feeling of being on the cutting edge of progress, which is essential to some.
There are also disadvantages:
- There is a high risk of losing invested funds.
- High entrance threshold.
- The complexity of startup analysis. These are young projects. Information and analytical services need to provide detailed information on them. You may need venture capital consulting help.
- A possible change in legislation.
What Are the Pros and Cons of a Startup?
Among the pluses are:
- The ability to attract the necessary funds if it is impossible to get a loan;
- There is no need to provide a deposit or prepare many documents;
- It is not required to pay interest for the use of money;
- If necessary, it is possible to attract additional investments;
- You will not have to return the spent funds in case of project failure.
The disadvantages are:
- Difficulty finding depositors;
- The need to allow the depositor to control the company;
- Part of the company must be given to the investor.
- Risk of funding loss if the investor abandons the project for any reason.
- There are more advantages for a new startup because otherwise, the project is unlikely to be implemented.
What Is the Role of Venture Capital Consulting and Expertise?
If you have not had experience working with startups before, it is better not to enter into transactions alone. Investors without knowledge often give money to random startups interested in them without assessing the risks because, before that, they dealt with classic businesses in which foresight, entrepreneurial experience, and intuition lead to success. After failure, investors who choose such a path quickly become disillusioned with the venture.
Assessment of the basic feasibility of the innovative project and improvement of the quality of decisions regarding financing is one of the goals of the venture expertise. With the help of venture capital consulting services, it is possible to assess the scientific and technical level and the project’s economic efficiency and determine the volume of demand for the manufactured product.
For companies engaged in venture capital, it is better to evaluate startups at the initial stages and activities. For this, financial reporting, product analysis, and assessment of possible market coverage are studied. The team of founders of the startup is also an important indicator. Such professionals as Waveup are happy to help entrepreneurs in terms of attracting capital for the development of their new projects.