Reasons for Investing in Venture Capital

Venture Capital


There are no people who do not seek safe funds to invest money as investing in venture capital. Although there are different places to invest, everyone thinks it is safer to keep money in the bank. Many people buy savings certificates. 

Indeed, that is less risky investing in bank. The capital market is the most risky place. It’s hard to find the bottom of the money there. You have to trade with understanding, which is not controllable. 

While investing in venture capital is considered risky by many today, it is also being considered as a more lucrative fund to invest money.

Many companies have sprung up to manage venture capital. It includes Bessemer Venture Partners, Founders Fund, GGV Capital etc. You can invest your savings in a trusted organization. In this article we will try to identify the reasons for investing in venture capital.

Interest free financing system

Venture capital does not transact interest like the conventional financial system. This leads to the feeling among ordinary investors that they are not getting involved in interest system. While interest risk may seem low, as it increases the risk to the borrower, it can also affect investors in the long run.

Especially when someone is a defaulter, if the situation of the bank is fragile, the depositors do not get their money back no matter who is responsible, even if they get a small amount. 

Those who invest in venture capital do not want to take interest related risk. The current volatile state of the banking system is the reason for the interest of the present young generation towards interest free investment.

Trouble free investment

Where there is less hassle to invest, there is more investment. If you want to invest money in the venture fund, you can invest there. No one is known to have been disappointed. 

There are many people who do not want to spend time behind the people of the bank to invest money. As there are different skims of investment in the bank, people are hesitant about which scheme they will sign.

Venture capital does not have this problem. This fund calls on people to spend money. This fund manager also has no risk as he sells the risk. It can be said that risk management is basically the job of venture capitalists.

Controllable funds

This fund is controllable. Its value should not be so different from income and expenditure. As seen in the capital market, this is not the case here. False transactions in the capital market increase or decrease the price. That cannot be controlled by ordinary traders. 

Even when the market does not move according to the researched knowledge, the market seems to be run by ghosts. There is nothing for a wise trader to do.

But Venture Capital invests in a startup by looking at and understanding the possibilities. Venture capitalists own a good company if only 30% of startups are successful.

Funding in potential sectors

The sectors from which the money invested can bring more profit, seeing and hearing all that, Venture Capital invests there. For example, if an organization wants to sell shoes of new designs, then if the company needs capital, venture capital can see the potentiality there.

Because new designs are likely to be established in the market if at the same time the shoes are durable. Apart from the leather sector, such investments can also be made in the vegetable export sector. Even investing in meat production farms can be profitable. 

Another potential sector is technology. By investing in various apps and web tools, many venture capitalists have reaped good harvests.

Knowingly controlling risk

Venture capital knowingly takes risks. Banks do not take any such risk. So even if the bank’s money is lazy, the money of venture capital is not lazy. These funds invest in various businesses knowing the risk. There is no tension here, because, an intentional game goes here.

Where money is invested behind all the 100 runners, venture Capital gets its return as soon as anyone wins the race. And someone will win.

Can give more profit

The higher the investment, the higher the profit, it also gives profits like ownership. Why venture capital invests so easily? This question can be answered in this way – the return on investment is low, but the future is much better than where the return comes from.

Even investing millions of dollars in 10 startups can take on the responsibility of 1 million if all of them suffer losses and only one startup does not deviate. It alone can repay 1 billion USD. It could even return 100 billion Dollars. There is no possibility of more profit in any other investment plan.

New concept of financing

While this is a new concept of investing and receiving investment, it is scientifically great. You can invest here with the desire to stay with new ideas. The younger generation applauded the new idea earlier. They are the first to bring such ideas to the market. And they sustain them.

Old people despise new ideas. Venture capital is a new concept outside the conventional investment system. It is much more benevolent than previous ideas. New people just don’t like profitable companies. Young people promote any idea that is beneficial for the people.

Partnership in marketing innovative products

Banks do not have the courage to bring innovative products to market. So they don’t want to lend money there. Venture capital invests in new business. As a result new products come in the market. Sequoia Capital did this job last years. 

In the case of new products, it sometimes happens that it can upset even the multinational giant companies. In the absence of capital, that product cannot come to market, it cannot happen.

Innovative products are first used by young people. They take innovation forward. They create venture capital and they invest there. The rate of helping each other is higher here.

No middleman

The cost of running a bank is high. Since the bank conducts other activities besides loans, the trouble of the bank is more. But there is nothing in venture capital that is more costly or troublesome to manage. You can see the management of the Index Ventures. 

Actually, banks are profitable but venture capital is fully investment oriented. Banks are not trying to raise money.

The bank’s commitment to return the money to the customer is small. They can only make a few percent profits as interest. The bank pays the profit to the borrower. 

In many cases it is seen that the owners of the bank use the money of the bank in other business by using anonymous or tactic. The bank also pays his agent. There is no such middleman in the venture.

Secured fund

Venture capital is relatively safe. It is safer than the capital market, less troublesome. No hassle of trading every day. You don’t have to review the market every day. It is safer than a bank too. 

Unlike banks, money is not deducted in the name of various service fees.

Venture capital like Index Ventures does not work in the interests of established businessmen. It does not become a puppet in the hands of the beneficiaries. It invests in potential sectors. As a result it is a safe fund. Venture capital policy is excellent.

Read: How to Earn Money Online Without Investment: Tips for Students?

Last things

Only Venture Capital has the advantage in investing. Many newcomers do not know the virtues of venture capital. So still it is not so extensive. 

Seeing something, it is slowly becoming popular. Venture capital is growing in popularity because it is safe and invests money in potential ventures. Accel, Andreessen Horowitz, Benchmark are the popular name today, according to NY Times

In developing countries, venture capital can play a significant role in curbing capital scarcity and unequal competition and unequal distribution of capital.

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