Importance and Growth Trends of Venture Capital - Financial Case Study

Running head: FINANCIAL CASE STUDY
Financial case study
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1FINANCIAL CASE STUDY
Table of Contents
Answer (i)...................................................................................................................................2
Answer (ii).................................................................................................................................3
Answer (iii)................................................................................................................................4
Reference....................................................................................................................................7

2FINANCIAL CASE STUDY
Answer (i)
Venture capital
It is the form of financing provided to the privately held businesses through investors
in return of entity’s partial ownership. The venture capitalists (VCs) recognizes the promising
products, new technologies, concepts and offer the require funds for moving forward the
project. In return as payments the VCs generally accepts stake, ownership or equities. The
general impression regarding venture capital is that it is quite typical, however, as per the past
records lower than 1% companies opted for VC money (Hsu et al., 2014). Canadian
policymakers and stakeholders strengthened VC sector on priority basis with regard to the
understanding that strong VC industry is crucial for developing vibrant tech ecosystem. As
per the recent trend Canada has made significant progress in VC.
Investment in venture capital capital is considered as risk capital or as the patient risk
capital owing to the fact that it includes risk regarding losing of money if VC does not
succeed which in turn will take medium to long run period for the investment for fructifying.
Generally the VC comes from the individuals with high net worth and institutional investors
and it is pooled together through dedicated firms for investments. Venture capital is the
amount provided by the outside investors for financing growing, new or the business with
troubles. While VCs offer funding they are well known regarding the fact that it involves
significant risk regarding the future cash flow and profits of the company. VC is regarded as
most appropriate option to fund the the costly source of capital for the entities (Bernstein,
Giroud & Townsend, 2016). As most of the businesses require large amount of up-front
capital they opt for VC as no better alternative is available. Main characteristics of VC
investment are as follows –