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Basic Ratio Analysis of Real Estate Investing
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Government Spending: A Cure for Unemployment
All over the world, governments are held accountable for the unemployment rates prevalent in their country. It is as if, the government’s main duty is not to govern but rather to provide employment to every willing person in the country. Therefore, whenever unemployment rears its ugly head, governments find themselves under increasing pressure to change […]
The Big Bust Washington Mutual (WaMu)
Washington Mutual (WaMu) was one of the oldest and biggest banks in the United States. Like many of its peers, this bank had survived several financial shocks such as World Wars, Great Depression etc. Also, like many of its peers it became a big ticket casualty of the subprime mortgage crash. Washington Mutual (WaMu)’s fall […]
Impact of Political Stability on Businesses and Working Professionals
The Perils of Political Instability and Uncertainty If there is one thing that business leaders and entrepreneurs hate that is instability in the macro environment. Businesses operate according to forecasts and scenarios about the future that comprise surprises as well as certainties. However, as much as businesses factor in uncertainty, the one thing that wants […]
Venture capitalists or Angel investors are entities and individuals who fund startups and new businesses. There are many entrepreneurs with great business ideas but who are in need of funding for their ventures.
It is not enough to have a great innovative idea when you cannot find funding to take it to fruition. This is where venture capitalists enter the picture as they provide the much needed seed capital to get the venture going.
In other words, venture capitalists are those entities or individuals who when they find a business idea compelling and makes economic sense, they provide the ideators with funding so that their startups can be incubated.
The term incubation is used to denote to the fact that the initial handholding of the startups must be done in a manner similar to how infants are incubated in their infancy. This means that the venture capitalists and angel investors not only provide initial funding but also guide the startups through their infancy so that they can be put on their feet and hit the ground running.
Venture capitalists drive innovation and profitability of new ventures. Any economy needs new ventures to succeed as part of the creative destruction process of capitalism. This means that for an economy to grow, it needs constant innovation and productivity leaps that new ventures often provide. As the new ventures need funding and support during the initial phases, venture capitalists are needed for these startups to hit the ground running.
Moreover, new ventures have to be profitable as well as it has been estimated that nearly 50 percent of new ventures fail. This is where venture capitalists who evaluate the business ideas and separate them according to how profitable they would be play a critical and a crucial role in determining the success or otherwise of these ventures.
As the examples of Silicon Valley in the United States and to some extent Shanghai in China show, venture capitalists with their deep pockets and keen economic and financial sense can indeed be an asset to the economies of the countries. This is the reason why the US is way ahead of other countries as far as innovation and innovativeness is concerned as it has a long history of venture capitalists and angel investors funding startups and bringing them to fruition.
It has often been said that venture capitalists fill the void that is created between the government and the private sector. However, many governments across the world actively fund new ventures, the bureaucracy, and the red tape that is involved in governmental decision making often stymies the funding of startups and the new venture incubation process.
Further, it is not possible for the government or the banks and financial institutions to fund every good idea that comes their way.
Moreover, the venture capitalists are usually staffed with industry veterans and experts who can evaluate a business idea in an expert manner and decide on the profitability or otherwise of the idea.
Apart from this, venture capitalists are also needed for guiding the startups in their formative phase.
Venture capitalists are needed as they make the creative destruction process smoother and make the startups transform themselves from chaotic outfits to well-oiled organizations. This means that venture capitalists have a key role to play in shaping the economic destinies of countries.
Finally, without venture capitalists, the private sector would be left with no one to guide them on the future directions of the economy and society.
We have considered how venture capitalists contribute to the economies of nations.
It must be noted that almost all great business ideas and innovations like Microsoft, Google, Apple, and Facebook have all come about because of active venture capitalist support and guidance. This is the reason why venture capitalists are so crucial to the eventual success of capitalism.
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