Venture capital is a financial capital that is used by many companies, business, and organization to raise capital so that it can start up businesses or expand the business. The venture capital fund makes money by using the equity that the company invests. The capital source is mostly used by software and biotechnology industries. Venture capital can be considered as private equity, but not all private equity can be termed as venture capital.
The decision team of the company takes the consideration of venture capital to help raise funds to generate capital to run the company as well as expand business. The advantage of using venture capital according to the decision team is that it is attractive to companies that are small to be able to raise funds for from the public market and also attractive to business that are new to the market and are easy to merge. The advantage of using this capital source is that it is more appropriate to business that cannot be able to business security of earning a loan. According to the decision makers of the organization the firm is set to use venture capitalism to raise funds so that it they can be able to invest in less mature and smaller companies. The other merit if venture capitalists are that they are able to get significant control over the company decision as well as valuable position on the ownership of the business.
The challenge that faces the use of venture capital to raise funds for the business are that when dealing with venture capitalism, there is a need for complex and lengthy process that calls for processing of business plans, and financial projections so that the creditor may be able to confirm the eligibility of the business to repay the loan. The other challenge of using venture capitalism is that the initial process has some fee paid a challenge to the organization since it lacks the capital to pay the fee.
Valuation of investments has been a point of contention in the business and financial circles. The use of market value has been the best way to make business valuation. Valuation of investment plays a critical role in providing information to potential investors as well as helps businesses decision making team to plan for the future. Market value investing is determining and finding stock that the market has not yet priced. Market value investing is significant investing method since it is able to influence the stock price. Market value fundamentally works with companies’ growth earnings, cash value, and determining the book value. The advantage of value investing using market value is that investors are able to work with a company for a long time.
One of the main and essential features of using market value in investing is the use of the market right. One of the reasons why market valuing is essential is that it can be able to use market right to ham investment by declining revenue and declining earnings. This method can be beneficial to pave the way for increasing investment mostly to small business. The other significant us using market value in investment valuation is that Price Earning can be used to determine equity ratio- an element for proper business planning and management. This allows strong earnings after investment. One of the worst abuses in market evaluation is insider dealing and improper disclosure of company information. Improper disclosure of information can lead to over evaluation of the market value. Manipulation of transactions is another abuse. Manipulation of accounting figures is the worst mistake during investments that run a company to liquidity.