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¶ … Capital
According to the National Venture Capital Association in the United States, venture capitalists help entrepreneurs "turn innovative ideas and scientific advances into products and services…" Venture capitalists do this by providing both funding and guidance, typically to small businesses that need this funding and guidance to take good ideas into the rapid growth stage of the business life cycle. Venture capitalists usually focus on new, innovative products and techniques. VC not only lends entrepreneurs they money that they need to bring a product to market, but also can provide managerial expertise, especially to firms that are otherwise run by scientists, engineers or investors. That business expertise helps to ensure that the business can manage its rapid growth through the IPO process.
A venture capitalist takes on a significant amount of risk, in that when the VC invests, the business idea has not yet proven...
The idea itself might be great, but when the VC enters the business the product or service is just in the beginning phase of commercialization. The venture capitalist takes an equity stake in the business, and then as the company enters the commercialization phase, the VC profits from the capital gains. This is why the VC provides management help to the company -- because that is how the VC can increase the odds of a strong appreciation in the value of the company. The venture capital locks in the capital appreciation when it sells out, either when it takes the company public with an Initial Public Offering or when it finds another buyer.
The Southern Cross team faces a number of challenges in Latin America. One is that the environment for venture capital differs significantly from country to country, depending on local laws and culture. The Latin American market is not as homogenous as many think, and as a result…
Works Cited:
NVCA. (2012). VC industry overview. National Venture Capital Association. Retrieved May 2, 2012 from http://www.nvca.org/index.php?option=com_content&view=article&id=141&Itemid=589
"Southern Cross Latin American Private Equity Fund." IESE Business School E-115-E.
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