Venture capital
Venture investors accept high business risk in return for the prospect of significant capital growth. They may provide expertise, contacts and governance support as well as funds, but typically require ownership rights and influence. Funding can be staged against milestones. An exit may involve a sale, flotation or another investor, and is not guaranteed. Venture capital is part of the broader private-capital landscape and is not the same as a routine secured bank loan. Evaluate dilution, control, growth expectations and the suitability of the investor as well as the cash supplied.
Worked example
A young software company raises $1 million for a 20% stake, implying a $5 million post-money equity valuation under the simple terms. The investor also negotiates governance rights and expects an eventual exit; the business is not merely borrowing $1 million at a fixed interest rate.
Common mistake
Ignoring the ownership and control consequences because the finance has no scheduled interest payment.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Direct | September 2026–June 2027 |
| ACCA | FM | Direct | September 2026–June 2027 |