Venture Capitalists

[erpowers]

Can anyone explain to me how venture capitalists work. I know they help people with starting a business, but I do not know how it exactly works. How would a person get money from a venture capitalists? Does one have to repay the money. So how does this thing work?

[benburch]

1. Vulture Capitalists...

...give you too little money in return for the vast majority of control in your business idea. They can freeze you totally out if they like, and if they get cold feet can close you down in an instant and leave you penniless and without the opportunity to go it on your own because they made you sign a non-compete clause.

[adriennui]

2. i know a couple of venture capitalists

to put it as tactfully as possible....they are not in it for altruistic reasons and yes they can be nasty little pigs who get off on power.

[brmdp3123]

3. You have to convince them that you have a good idea, and

that they will be able to make money from it. They put a certain amount of their money, generally in return for a percentage of the profits. The particulars are negotiable.

[applegrove]

4. They are experts at assesing "new". New businesses, new technologies

at play, new industries. They go in, become partners..they give the money..and sit on the board.. watch that everything is on the up and up.. and share in the huge profits that come with some great idea (because they are part owners).

Otherwise no good new ideas would be funded.

They really are creating jobs.. jobs for the future if they are any good at what they do.

Alternative fuels..would be a field venture capitalists are interested in now.

[applegrove]

5. They would be the people who funded the high tech companies 40 years

ago. Seattle owes its current ranking as great place to work and live because of venture capitalists. Think "new industry" outside of government subsidized ones.. in the USA that would be defence. So think new industry that would not get off the ground in the usa.. outside of defense.

[burythehatchet]

6. LIke any other investors, there are good ones and bad ones

one huge benfit of working with a VC is the ability to connect into an effective network of contacts and vendors. Also, their board representation can be very powerful if they have previously funded in the particular sector.