- Venture Capital can bring in very large sums of money compared to taking loans. It is a more viable route than debt financing when contemplating a massive expansion or facing start-up issues.
- It also stands in contrast against debt financing as it doesn’t need a collateral asset in the event of a loan default. This could mean the difference between staying in business or insolvency.
- Lastly, the Capital’s return is based on the company’s generated profit which indicates that the venture firm/ individual have a vested interest in the company’s wellbeing.
- Venture Capital comes at the cost of equity and thus control. Acceptance of a venture capital for a majority share may result in the complete loss of control or being ousted from the company.
- The large sums of money associated with venture capital is accompanied with very high interest rates, which will result in less profits generated for the business.