Venture Capital (VC) is usually defined as an independently managed, dedicated pool of capital that focuses on equity or equity-linked investments in privately held, high growth companies. It is one of the important factors which contribute to the growth and potentiality of business as well as for entrepreneurs. Entrepreneurs and SME managers face two key choices when financing their ventures: debt or equity. Debt in the form of personal loans (including credit cards) and bank loans, key sources for most nascent ventures, gives efficient incentives for managers to exert effort and allow entrepreneurs to maintain control. The availability and utility of debt vary significantly with economic conditions, which, in turn, will have an impact on the supply and cost of capital. To a lesser extent, entrepreneurs rely on equity financing, in which parties external to a venture obtain partial ownership (and control) in exchange for financial capital, thus diluting manager's incentives to expand effort. Equity financing is particularly important for high-growth ventures, since the amount of debt financing available may not permit sufficient rapid growth in volatile industries (for example, technology). Objectives and incentives that are well aligned between investor and manager are most efficient and facilitate additional value for the venture. The paper tries to bring out effect and growth of venture capital funding over a period of time with that of traditional funding. Criteria of venture capital decided by the general investment venture capitalists, and then finally adding the conclusion of role and importance of Venture Capital in the Entrepreneurial Development.
Private Equity and Venture Capital: an Empirical Analysis
