Advantages of Venture Capital Financing

▪ No collateral required
If you have a business plan along with the business model and
profitability then angel investors or venture capitalists invest
in your project without any collateral.
▪ No repayment period
Unlike debt financing, you need not pay any fixed monthly or
yearly payments to make it happen. This enables a company
to manage funds efficiently for expansion of business or
purchase of machinery to boost production.
 Advantages of Venture Capital Financing

▪ More cash on hand

You have more cash on hand and no loan burden. So, you as
the company can declare a dividend to the shareholders in
accordance with the profitability of the company.
▪ Long term planning –
Since the investors do not expect the immediate return on
their investment, you can manage the funds efficiently which
will yield better returns in the near future.
 Disadvantages of Venture Capital Financing
▪ Complex Process
In order to raise funds you need to approach venture capitalists or
angel investors by submitting a robust business model, future
revenue projection, whether your venture will succeed in the future,
profitability, etc. So, raising a fund from venture capitalists is quite a
long and complex process.
▪ Share of Profit of the company
Since equity gives an ownership right and voting right to the
shareholders, the dividend paid to the shareholders is more than the
interest payable in the case of debt financing.
 Disadvantages of Venture Capital Financing

▪ Ownership right
Since venture capitalists have ownership right they have a
right to vote and express their decision for the direction of the
company.

▪ Loss of control
Since the shareholders are the owners of the company, you
need to consent or consult with the shareholders in the case of
differences of opinions among the shareholders.