Page 12 - BrewDog Venture Capital

Features of Venture Capital

The main features of venture capital are:

• Long-term horizon: In general, venture capital activities

are long term in nature. Taking three years plus to
become commercially viable

• Lack of liquidity: Since the project is expected to run at

start-up stage for several years, liquidity may be a

greater problem.

• High risk: The risk to the project is associated with

management, product, and operations.

• High-tech: A venture capitalist looks for innovativeness

through which the project can succeed.

• Equity participation and capital gains: A venture

capitalist invests his money in terms of equity. He may

receive a dividend return when the project

commercially succeeds, but his return on investment

(ROI) comes primarily from capital gains when the

company is disposed of.

• Participation in management: Unlike the traditional
financier or banker, the venture capitalist can provide

managerial expertise to entrepreneurs besides money.