9.1c Ventures Flashcards
Corporate venturing definition
An agreement between two companies that will see an established company invest in a new company that it believes will have high growth potential
Venture capitalists/business angels definition
An individual or small group that invests in companies
What is an alternative source of finance for ventures?
Merchant banks
Examples of corporate venturing
- Unilever Ventures
- Google Ventures
What happens in corporate venturing?
The bigger business will buy shares in the business (an equity stake) and become very active in the decision making process
Why do bigger companies invest in smaller companies?
- To benefit financially from their future success
- Part of a strategy to move into a new industry or market
- To gain access to their intellectual property
Why do smaller companies welcome investments?
They can grow by gaining access to:
- Additional funding
- Expertise
- Operation processes
Advantages of venture capital:
- Venturists can have option of not taking dividends they are entitled to in order to keep more money in the business
- Comes with knowledge and contacts
- Used by high-risk start-ups who would struggle to get funding elsewhere
Disadvantages of venture capital:
- Smaller business has to give up some ownership
- The larger business might have too much influence on the smaller business
