Advantages & Disadvantages

Advantages

  1. 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.
  2. 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.
  3. 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.

Disadvantages

  1. 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.
  2. 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.
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