What is venture capital?
Venture capital is a type of finance for businesses as well as an investment vehicle for affluent individuals and institutions. In other words, it's a means for businesses to get money quickly and for investors to accumulate riches over time.
VC businesses raise funds from investors to form venture funds, which are used to purchase equity in early- or late-stage companies, depending on the firm's focus (although some VCs are stage-agnostic). These investments are locked in until the firm is purchased or goes public, at which point VCs profit from their initial investment.
Why startups seek VC funding
In general, lenders do not lend to startups in the same manner that they might to other businesses (e.g. agreements where the borrower agrees to pay back a principal, plus a set level of interest).
Financial models, income statements, and balance sheets are used by banks to decide whether a company qualifies for a loan – papers that aren't as relevant when determining the value of an early-stage firm.
At Accotax, we pride ourselves on being a London chartered accountant that cuts out all the jargon and speaks your language. This ensures that you understand the mechanics of your finances, thus enabling efficiency and stability while you grow your business.
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