Q I AM a university student. I have started a company with my friends.
We have heard about business angels and venture capital and would like to know more.
How does venture capital work? Will a business angel or venture capitalist investor have a say in how our business is run?
A Business angels tend to be entrepreneurs themselves and understand the struggles that start-ups face.
For many start-ups, angel investors are the preferred source of funding, as they typically do not try to control the way you manage your business.
Venture capital is used to finance high-risk, high-growth and high-return businesses in exchange for an equity stake in the company.
The amount of equity a venture capitalist holds is usually based on a combination of several factors, including the company's stage of development at the time of investment, the perceived business risk and the amount invested.
To realise his investment target, the venture capitalist would work with the investee company for the best interests of positioning the company for profitability.
Thus, in addition to providing risk capital, contributions include providing expertise, experience, contacts and discipline.
Depending on the terms of the investment, venture capitalists would usually ask for membership on the board of directors to assist the company achieve its growth strategy.
You can refer to a list of business angel and venture capitalist networks at www.ace.sg - the Action Community for Entrepreneurship's website.
Answers are provided by EnterpriseOne. For more information, go to www.business.gov.sg
