12 Main Role and Importance of Venture Capital (Explained)

Venture capital is an important role in materializing the idea of establishing the enterprise or the industry. Without it, the entrepreneur can not do anything.

role and importance of venture capital
role and importance of venture capital

In the present age of increasing competition, aspiration for facilities and efforts comforts and excessive shows, the good impression should be visible even at the very beginning of the enterprise or the industry, which is possible only by venture capital.

Role and Importance of Venture Capital

In brief, the role and importance of venture capital are as follows:

1. Promotion of the Enterprise

This is the foremost function of an entrepreneur.

For it, the entrepreneur carries out various functions, like – emergence of the business idea, to obtain information about related facts, selection of the location, preparation of plant layout, registration of the enterprise and completion of various legal formalities.

For all these activities, the role of venture capital is very important.

Otherwise, the emergence and end of the business idea together are certain.

2. Encouragement to Entrepreneurship

Venture capital is an important tool or method to encourage entrepreneurship, the reason being that on one side, the venture capital encourages the innovators to establish the industries/ and on the other side small and medium entrepreneurs and also encouraged.

Related: 18 Key Factors Affecting Capital Structure (Complete List).

3. Performance of Economic Activities

Economic activities, like – sale and purchase for products, purchase of means and machinery for converting raw material into finished products, carrying out production and its availability to the consumers may be efficiently performed through venture capital.

As a result of all these, the entrepreneur may take high risk and the growth may also be high.

Besides, the possibilities for higher profits also increased.

4. Management and Organization

Management and Organisation of the industry should be efficient for the performance of various economic activities.

For example, manpower planning, taking work from competent persons, to engage the service of professionals and maintaining balance therein, for getting economic activities accomplished.

For all these, venture capital in the required volume is essential.

Otherwise, other sources will remain in the form of the source only and it will not be possible to use them for actual economic activities.

5. Dominance of Desired Skills and Competencies

In each area, professionals are appointed.

If the entrepreneur has to avail of the services of any particular person for specific work, then the venture capital has a special role in obtaining his desired skills.

Related: 15 Essential Features of Venture Capital (Explained).

6. Fulfillment of Financial Requirements of High-Risk Entrepreneurs

Use of automatic machines, computers, the latest machinery, robots, new sources of energy, email, rocket research, etc.

Due to scientific progress have not only brought the technical Revolution but has also increased the risks.

role and importance of venture capital
role and importance of venture capital


The financial requirement of entrepreneurs involving high risks has been met by venture capital companies.

7. Representation of Funds Incorporated in New Enterprise

Venture capital represents the funds in the new enterprise.

Sometimes, debt funds are also made available for it.

8. Assistance in Strategy Formulation

Today’s age is the age of competitions, which can be seen in all areas, activities, stages, and places.

However, venture capital has to sustain in all types of competition, which enables the entrepreneur to prepare strategies right from the establishment of the industry to its development expansion.

9. Possibility of Rapid Development Expansion

Venture capital includes all types of high risk and high probable investments.

Hence, venture capital is made available to a new company from the starting stage (promotion of the enterprise) to advance further.

As a result, the possibility of rapid development expansion of the company increases.

10. Other Roles and Importance

  1. Investment of venture capital for the purchase of modern machinery establishment of laboratories, the appointment of scientists and training for new functions and activities, etc.
  2. Employees’ welfare and amenities.
  3. Project evolution and reports.

Thus, now you know the role and importance of venture capital.

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