Advanced Search

Sources of Finance

Venture Capital

Venture Capital has become a vital aspect of the source of finance market over the last 10 to 15 years. Venture Capital can be defined as capital contributed at an early stage in the development of a new enterprise, which may have a significant chance of failure but also a significant chance of providing above average returns and especially where the provider of the capital expects to have some influence over the direction of the enterprise. Venture Capital can be a high risk strategy.

The British Venture Capital Association (BVCA)

With 165 members, the British Venture Capital Association represents the majority of UK based private equity and Venture Capital firms. Since 1983 additional private equity invested in UK industry has amounted to £40 billion with a further £14 billion invested in the rest of Europe. Those funds have gone to assist 25,000 UK companies. In 2002 alone £5.4 billion was invested in 1,500 companies Europe wide.

See the BVCA web site for more information (http://www.bvca.co.uk).

Business Angels are informal investors who are wealthy and entrepreneurial individuals looking to invest in new and growing businesses in return for a share of the equity. They usually have considerable experience of running businesses that they can place at the disposal of the companies in which they invest. Business angels invest at all stages of business development, but predominantly in start up and early stage businesses. The majority of them tend to invest in businesses located within a reasonable distance of where they live.

The general profile of a business angel style of relationship is that:

• you are looking to raise between £10,000 and as much as £600,000
• you are prepared to give up some of the equity in your business and allow an investor to take a 'hands-on' role
• your business has the potential to grow sufficiently over the next few years to provide the business angel with a return on investment
• you can offer the business angel an 'exit' (e.g. through a trade sale or the repurchase of their equity stake) at some future date

Business angels, then, are small business related investors who can have a major impact on the success of a start up company.

| Index | Previous | Next |