Wednesday, March 8, 2017
Benefits and Drawbacks of Venture Capital Financing
California financier Bill Malloy serves as a founding general partner of venture capital firm Sway Ventures. Through his company, Bill Malloy provides venture capital to early- and mid-stage technology companies.
Venture capital funding can be a huge help to businesses. While loans can sometimes be more convenient for financing a company, the loan must be paid back within a set amount of time. For early-stage companies, this may be difficult.
Venture funding does not have a repayment schedule and provides new companies with extra cash without an expectation of repayment. Further, venture capital funding is often accompanied by additional expertise and connections that help new companies succeed.
However, venture funding is not entirely without strings. Investors request equity in return. Depending on the amount of equity, an investor may earn a controlling role in the business especially as companies grow and expand into private equity.
This is not always detrimental, as long as the investor shares a similar vision and goal with the business owners. But when these priorities and goals are not aligned, business owners may see their company move in a direction they did not want.