The nature and scope of venture capital are quite large because, for every Adventures related to business, non-business, and industries requires an investment of capital. No work may be accomplished without capital.
Not only that, but venture capital is also required to meet the various requirements for the formulation of a new and existing project, like the initial stage of the project idea, for implementation of the idea, for project evolution, for project management, etc.
Nature and Scope of Venture Capital
The nature and scope of venture capital may briefly be explained as follows:
1. Promotion of Enterprise
The entrepreneurs promote or establish the enterprise, after assessing the business opportunities.
Venture capital is required for gaining knowledge about these opportunities, making forecasts, determining the objectives, deciding the location, preparing plant layout, registration of the enterprise and completion of other formalities.
The capital sows the seeds of the enterprise.
Hence, it will not be an exaggeration to term it as “seed capital“.
2. Formulation of Firm
The capital venture is also required for the formation of the firm after the practical shape is given to the idea of the entrepreneur.
In other words, the form of the organization, single, partnership, company or any other form will be decided whether less or more capital is required?
The volume of capital will also depend upon the scale of production.
Venture capital is used for registration of the firm, contracts, incorporation certificate, business transaction certificate, etc.
If the scale of production is small, less capital is required and if the scale is large, more capital is required.
Related: 15 Essential Features of Venture Capital (Explained).
3. Production of the Product
For the production of any product, the firm has to face not only Complex problems but has to arrange adequate capital.
Without that, it will not be possible to give returns to the sources deployed for production.
In that case, the production of the product will be getting blocked.
4. Management, Organisation, and Control
Venture capital is required to appoint the employees, officers, and subordinates to continuously have a watch on the quality of the product and to see that the organization is working properly according to the objectives and also see that performance is in consonance with the determined targets.
5. Marketing Stage
After the production of goods by the enterprise, the next stages of marketing.
Here, it is to remember that if the gap between the production and the marketing stage is short, the requirement of venture capital will be low on the contrary, if the gap between production and marketing stage is more, the requirement of venture capital will be high.
Its reason is that the parties to whom payments are to be made will not care, whether the firm has the capital or not.
They will not wait for the receipt of capital.
Related: 12 Key Characteristics of Ideal or Optimal Capital Structure.
6. Development Expansion and Diversification
The timely inflow of the capital with the requirements helps in ensuring the sound footing of the firm in the market.
The sound footing necessitates additional capital requirements, as it leads to the emergence of ideas for diversification and hence feelings for the need for more capital starts.
All these results in large profits and the stability of the firm go on increasing.
7. Listing of Company at Stock Exchange
It is better to have the firm registered at the stock exchange, for its permanent existence and Goodwill. But, it is not easy.
For it, stocks security (Regulation) Act and directions of SEBI are to be complied with.
It also requires venture capital.
8. Other Areas
Besides the aforesaid scope of venture capital, it is also required for the search of additional new opportunities, participation in development programs, contribution to social development and future of the Enterprise.
Thus, now you know the nature and scope of venture capital.
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