The concept that we are discussing is a specialized term of the economy and, more specifically, the scope of the financing companies. The term venture capital fund is internationally known by its name in English, equity fund or private equity. When a company it is quite common that face problems for their adequate financing, because banks finance companies that are already established and have a track record that supports them. So a company can finance your project without recourse to traditional banking can contact a type of investors, venture capital investors, those who have some funds to finance projects with some risk since they are in their initial phase. Venture capital funds tend to belong to private investors. However, there are also these funds with public ownership and be used to finance innovative projects with exclusively non-economic criteria. In this sense, some municipalities have venture capital funds to help finance companies with some unique features (for example, those that represent a change in the production model and that presents innovative aspects).
The concept of Fund of venture capital and its characteristics
A venture capital fund is a financing alternative and it is interesting for companies new or those who may not qualify for conventional bank loans. An entity's venture capital funds becomes a shareholder of the company which invests and their participation is usually temporary. The objective of the acquisition of the shares is to contribute to the expansion of the company and if this benefit the venture capital fund can start to recover its investment by selling the shares. The venture capital fund manages the money of a few investors and funds those projects considered attractive. In General, shares of companies are purchased in its initial phase (known as seed phase), at the time of growth or expansion or in the context of a change in business strategy. From the point of view of investors, venture capital funds are an alternative to traditional stock investments and represent a way of diversifying its investments. We must bear in mind that venture capital entities have direct access to the information of the companies in which they invest and this element can be attractive to an investor (these capital fund managers tend to be actively involved in the strategy of the companies and this is attractive for the investors).