4 de January de 2023
The venture capital is an investment model that focuses the resources on betting for companies in growth with high potential in their industry.This alternative emerged in Mexico more than a decade ago to promote key sectors in the seek of better returns.
This alternative alludes to a group of investors who invest their capital in a fund intended to boost small business.This kind of project mostly has an innovative product, but also many risks.
Venture capital investment must be willing to give high percentage of their shares, explain Edwing Márquez, economist and professor of the distinguished mexican university Universidad Nacional Autónoma de México (UNAM).
“It is nothing more than applying funds to companies that have the potential and are not listed”, says Edwing Márquez.
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What is Venture Capital?
The meaning of venture capital refers to an investment option for early stage companies with a high-growth potential. And for the investors represents an alternative with highreturns.
This investment model is an important economic and development engine for countries, due it:
- Generate employment
- Promotes innovation
- Create new business models
According to SVB, the investment in venture capital is made in exchange for a portion of the company's shares. In this sense, investors in this model have a long-term vision, and their expectations are to obtain favorable returns once the company is sold or goes public.
Venture capital funds invest in companies that generally are incapable of getting a traditional investment option, like a bank credit.
For the iinvestors committing their capital in a venture capital fund represents high returns. Although it requires experience and strategic advice to add value to the portfolio.
Private equity is an investment alternative to boost companies on growth or expansion. This investment improves projects in exchange for the opportunity to get high returns.
También puedes leer Venture capital en México: cuál es el panorama para los inversionistas.
How does Venture Capital work?
To understand how venture capital works, there must be a group of investors seeking for small companies to invest in. The members of the fund include this project with high-growth potential and profitability to their investment strategy from 3 to 10 years.
Now, to have success, there is a process. These are the stages of how venture capital investment works.
- Phase 1: is the raise of new capital for the company it usually lasts up to a year. With this capital injection, the venture capital makes the startup carry out market studies and review the potential of all the products and allow the creation of new ones.
- Phase 2:this phase is when the startup gets more capital. This stage is also used to determine the operating system, marketing and sales strategy, and also starts the seeking of new investors, this process usually lasts from two to five years.
- Phase 3: the final stage, the company already generates the first earnings. In this phase, the company is consolidated and ready to launch a public offer to expand the business and get listed, and the venture capital recovers its investment. This process lasts about three more years. }
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Venture capital is a long term investment, and is focused only on local or regional companies. Also, if the company is performing well, its participation usually increases, because investors profits also increase.
If you would like to invest in venture capital funds, we introduce you to WORTEV CAPITAL, where the annual return is 24% and it invests in innovative Mexican companies with high-growth potential.
The strategy focuses on including a nuclear business accelerator that supports the operation of the companies. In this way, the ventures obtain the necessary tools to improve processes and optimize areas, with the intention of achieving the established objectives in less time and reducing risk.
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