Venture capital is a capital offered to start up firms, small businesses and companies which have good scope for growth. The companies which provide capital are called venture capitalists and the capital or investment is called venture capital.
Generally, three stages of venture capitals exist in the business world. They are early stage financing, expansion financing, Acquisition/buyout financing.
1. Early stage financing: It again has 3 subdivisions, i.e., seed capital, start-up financing and first stage financing.
Seed capital: It is the initial amount which is required to start a business. It can also be defined as an investment provided for ideas or concepts which are yet to hit the market. Most of the seed capital funds are availed by entrepreneurs.
Start-up financing: These funds are used at the time when the company needs additional capital for production, marketing and R&D.
First stage financing: Provided to companies which require additional capital for operating a full-fledged business, after spending entire starting capital
2. Expansion financing: It is divided into three subdivisions, i.e., second stage financing, bridge financing and third stage financing.
Second stage financing: The funds are used to assist companies in expanding their present businesses.
Bridge financing: They provide capital until the company goes for IPO's (Initial Public Offer).
Third stage financing: Offers capital for further business expansion of the companies which are usually doing good. Used for marketing, working capital (Working capital = current assets -current liabilities ) or for developing a better product.
3. Acquisition or Buyout financing: The funds are used to obtain other business entities.
So get ideas, attract investors and become a successful entrepreneur. Many venture capital companies are ready to fund good ideas or those businesses which have good scope for growth.