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Venture capital |
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Venture CapitalCapital invested in a new or growing entrepreneurial venture in the hope of receiving future financial returns.Venture capitalCapital invested into small and young companies in return for equity ownership. Generally speaking, venture capitalists (VCs) supply capital to companies that are small, may be start-ups, are high risk, and which could not get the funds by listing on the stock market or borrowing from banks.In return for taking the extra risk, the VCs look for substantial equity, a seat on the board, and possibly the ratcheting up of their equity stake if performance targets are not met. Sometimes, they provide management and financial support to their investee companies, as well as just money. They will look for an exit through a trade sale or a flotation of the company within 2-5 years.Also called 'risk capital'.Similar MatchesJoint ventureJoint ventureAn agreement between two or more firms to undertake the same business strategy and plan of action. Venture capital trustVenture capital trustA type of investment trust which invests in small unquoted companies with assets of under £15 million, including AIM and OFEX companies, and which is designed to attract risk capital from higher rate taxpayers by giving them tax concessions.Like investment trusts, VCTs are quoted on the London Stock Exchange.As with investment trusts, their share price may trade at a discount to net asset value.They provide 3 types of tax benefit:-40% capital gains tax deferral, provided the shares are held for a period of no less than 3 years.- 20% income tax relief on the amount of the original investment- All dividends are tax free and all gains on disposal after 3 years tax exempt. But when the shares are sold, the original capital gains tax liability will be re-triggered.VCTs are only allowed to invest in companies under a certain size, and there is a limit on how much they can invest in any one company. The idea is that they must apply their funds to genuinely risky entrepreneurial ventures. Joint ventureJoint ventureAn undertaking by two parties for a specific purpose and duration, taking any of several legal forms. Two corporations, for example, perhaps from two different countries, may undertake to provide a product or service that is distinct, in kind or location, from what the companies do on their own. Venture capital limited partnershipVenture capital limited partnershipA partnership between a startup company and a brokerage firm or entrepreneurial company that provides capital for the new business in return for stock in the company and a share of the profits. |
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