Venture Capital
Venture capital funding entails significant levels of risk. However, venture capital has several advantages. First, venture capital does not involve the obligation for repayment in the case a start-up fails to actualize as planned. Second, venture capitalists are trustworthy because they are highly regulated. For instance, in the United States, venture capitalists are regulated by the Securities and Exchange Commission. Third, venture capital allows an organization to expand, unlike other sources of capital such as the bank. Venture capital has its share of disadvantages apart from the high risk identified. For instance, Rohm (2018) has associated venture capital with the dilution of ownership and control of the company, and before one gets the capital, lengthy and complicated processes are followed.
Based on the information that I have researched, the new client should consider adopting the use of venture capital to fund the bakery start-up. The approach is recommended based on the described advantage regarding the failure of the start-up. If the start-up fails, the client will not be required to pay back the capital invested in starting the business. It is worth noting that my approach differs from others in different ways. First, a group of classmates recommended a bank loan approach to fund the operations of the intended bakery start-up. Second, another recommendation by students entailed funding the start-up using crowd-funding. Crowd-funding includes numerous options that can be applied to fund the start-up other than investing opportunities and traditional lending (Brealey et al., 2020). Also, crowd-funding is relatively cheaper as compared to venture capital. Thus, my recommendation has changed based on the recommendation made by classmates because venture capital would work well for bigger projects. In contrast, crowd-funding can work well for a small project such as the subject bakery start-up.
References
Brealey, R., Myers, S. C., Marcus, A. J. (2020). Fundamentals of Corporate Finance. (10th ed). McGraw-Hill Education: New York, NY.
Röhm, P. (2018). Exploring the landscape of corporate venture capital: a systematic review of the entrepreneurial and finance literature. Management Review Quarterly, 68(3), 279-319.
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You are a business consultant who works with new business owners. A new client wants to start a bakery and seeks your advice.
Respond to the following in a minimum of 175 words:
Venture Capital
Based on what you’ve learned from the readings, discuss the advantages and disadvantages of using venture capital as startup funding for a business.
Describe what approach you would recommend for the client by using the information you researched.
How does your approach differ from the recommendations of your classmates?
How might your recommendation change after reading your classmate’s recommendations?