What is venture capital investment
In matters of increasing capital, one of the best, and at the same time risky, decisions may be to invest in various promising startups – venture investments. The risk is that such projects have no analogues, are absolutely innovative, which means it is not determined what profit, and when they can bring.
What are the risks
Venture capital investments are associated with high risks, but also with justified income. Risk – a set of factors affecting the partial or complete loss of invested funds.
The main causes of failure:
1. The lack of competence of the authors of the project.
3. Non-acceptance by consumers of a new product.
4. Lack of expected income.
There are two types of risks: investment, and innovative. The first type is directly related to the loss of invested funds, the second – with the influence of negative factors on the implementation of the project. Both factors are equally important.
When do innovative risks arise
• when innovations appear that reduce the cost of the manufactured goods. While only a particular company has such innovations, they will work. With the loss of know-how, the benefit from it also disappears;
• the use of outdated production methods that affect the quality of the manufactured goods. It can significantly reduce its cost;
• introduction of innovative technologies to create a unique product. It is likely that the consumer will not accept a new product.
Among the risks, one can distinguish unreasonable use of capital, unfair attitude of investors themselves, hiding certain information about themselves that could affect the development of a startup.
As a result, it can be noted that venture investment has not been actively developed, but is actively expanding and popularizing. It is associated with huge risks, costs, but it brings huge profits. Investments from venture capital funds go to the development of new promising and profitable projects. On average, after 3 years you can get a net profit. Such investments bring a new type of product to the consumer market.