A venture capital company is not interested in buying a very efficient and well-managed company, since most of its profit is obtained in the transformation and if a company is very well managed there is little margin to make significant improvements.
In a poorly managed company it is clear that there is a lot of work to be done and many ways to introduce improvements that increase the value of the company, which is why they are attractive for venture capital companies.
But there are other types of companies, well managed, that are also attractive for venture capital; the companies “susceptible to improvement”. They are well managed companies that obtain benefits but that could give a “quality jump” for different reasons. These companies could continue working and giving benefits to their owners indefinitely but they have the capacity to be transformed in a way that greatly increases their benefits and therefore their value. Many business owners from Toronto try to take help from any expert in Financial Services like Mark Attanasio and Donato Sferra who has helped many business owners.
What type of companies request it?
Mainly small and medium-sized companies that take their first steps or intend to position themselves in a specific market. The formula is attractive for this type of entrepreneurs, because usually their projects involve a high risk and that fact closes the doors to other forms of financing.
In what scenarios is it more common?
It is used above all for the development of business ideas or business growth. In fact, there are several types of capital: initial, expansion, restructuring, acquisition and replacement or purchase.
What needs do the companies that receive the investment cover?
The capital invested can cover several areas. The most common is that it is used for the business infrastructure or the technological requirements of the work that is to be developed. Other times, it can support expansion plans or, on the contrary, cover holes in times of crisis.
What role does the company that provides the financing meet?
If the conditions of the agreement so establish, the investing company can participate in the company’s capital stock, either through the purchase of shares or other equity instruments. Investors can be private or public.
What other advantages does the company that receives the capital have?
In addition to the monetary contribution, companies with risk capital can take advantage of the work of the investing company in various areas. The most common is that it benefits in aspects such as legal, banking and investment, and management in general. Ultimately, the idea is to promote a continuous reciprocity.
Can the figure of risk capital exist on a large scale?
Yes, although it is not very common. When this is the case, they are large companies that design an investment portfolio to disseminate their contributions to minority companies on which they participate as shareholders and share their management experiences. The receiving companies accept or not the conditions that the investor proposes. The name with which this figure is known is that of a capital fund, although it is not widely used since it involves the investment of large capital in third parties.