The term venture capital gets thrown around a lot in today’s world. It’s not a new phenomenon by any means, but it seems like the term comes into play more often than ever before. At the start of a new industry, successful companies have become a reality thanks to venture capital.
What is venture capital exactly? How does it work? By understanding a little bit more about venture capital, it’s easy to see why firms like Shima Capital are finding so much success. Headlined by Yida Gao, Shima Capital is one of many providing resources for bear market start-ups.
What is Venture Capital?
Venture capital, sometimes shortened to VC, is essentially equity financing. This is when capital goes toward an idea or business in exchange for equity. In many cases, this is a minority stake in the company. It can benefit the venture capitalist because they are getting a return on investment when growth takes off.
When a business owner or entrepreneur receives venture capital as a type of private equity, they receive the funds and assistance that they desperately need. The average person launching a company doesn’t have the money or resources to reach their full potential without assistance. The amount of assistance is different for every person.
How the Venture Capital Process Works
Venture capitalists will use the capital they have to invest in businesses with high growth potential or have shown growth in the past.
Venture capital firms like Shima Capital are looking to get in very early and build potential. Others might wait a bit longer to have a more sure thing. Companies usually need help at every stage.
Some confuse angel investors with venture capitalists. Angel investors only use their own money, while venture capitalists work with firms to get money from outside investors.
These types of investors also fall under the category of limited partners. This can be money from individuals, institutions, investment groups, families, and more.
Every venture capitalist firm is different and how they approach things. Diversifying as far as stages are concerned is one way to handle business, but others prefer only to invest in one specific way. Shima Capital found success initially with early-stage venture capitalist funding, but they haven’t looked back.
Businesses often get more than a good amount of capital from venture capital firms. They also can have some type of value added to their company thanks to the skills provided, experience, and available connections.
Keep in mind that a venture capital firm is heavily investing in a business and wants to see it succeed as much as possible. That means they will do what they can to make an idea a reality.
A typical setup is that an investor will join the company’s board and be a member or board advisor. They can also stay involved with strategic decisions while being active in other sectors.
The goal isn’t to take over the company but to be there when necessary. Shima Capital does a great job of having that balancing act of helping but not overstepping.
Some business owners shy away from bringing on a venture capital firm because they’ve heard that happening in the past. It’s better to have a great teammate in many instances.
Figuring Out if Venture Capital is the Right Way to Go
Venture capital has taken off more recently because it translates so well to financial and technology companies. Shima Capital focuses on Web3 and Blockchain companies, and many others have specific niches they might also focus on.
These businesses usually scale quickly, and the goal is to see fast growth to keep up with motivation.
If a business can solve an issue for the customer, have excellent scalability, and provide exit opportunities, it usually appears enticing to the average investor.
However, the average investor only feels somewhat comfortable with this new world, throwing around terms that seem foreign. Learning about Web3, Cryptocurrency, Blockchain, and other topics takes time.
Part of any venture capital firm specializing in new niches is being able to explain things to a potential investor.
The average person might hear people say that it’s time to invest and diversify, but savvy investors aren’t going to do that until they know exactly what they are getting into. Explaining the new financial and technological niches can help bring in new money.
Yida Gao has spent a lot of time talking to investors and letting them know just how great new opportunities can be to diversify a portfolio. It’s not all about making traditional investments and going from there.
Smartly looking at what’s next can open up some great opportunities. Risk is always part of the equation, just like with any industry, but most start to trust and lean on those following the industry closely.
Why Venture Capital is Here to Stay
Until there are more readily available ways to fund and grow a business or idea, venture capital will stick around for a long time. Venture capital firms are only growing and finding new opportunities to see what type of impact they can make.
Entrepreneurs with great ideas should understand that they have options when looking for the right venture capital firm.
Yida Gao believes that and focuses on standing out from the competition. Offering early-stage capital and assistance helps out tremendously. Every team member at Shima Capital brings something to the table that can help clients succeed.
