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What is a bold investment?

Venture Investment Definition

Venture capital or venture capital is an investment or capital that comes from private equity to provide capital to companies that show high growth potential in exchange for the investor getting a stake in stocks, and this funding is usually for start-up projects or to support small companies that want to expand, but not It has access to the stock markets.

However, it does not always take the form of cash only, but venture capital investment can also be provided in the form of technical or management expertise, and venture capital is usually allocated to small businesses with exceptional growth potential, or to businesses that have grown rapidly and seem ready to continue expansion.

Although this type of investment may be risky for venture capital investors, if successful, it will yield an above-average return on investment, which is attractive to investors.

Types of Venture Capital Funds

The types of venture capital can be categorized according to the stage in which the investor is involved, into:

  1. Initial capital: It is financing for new start-up companies, where venture capital funds provide initial capital for them to help get started, and venture capital companies are usually not funded at this stage, and if they participate, it is a small amount.
  2. Startup Capital:  It can be called a capital after an initial one because the startup in that period may have samples of its products.
  3. Early capital: It is pumped after two to three years of investment and seeks to increase sales.
  4. Capital expansion: the company seeks to grow the business.
  5. Delayed capital: At this stage, the company has achieved its sales and revenue goals and seeks to exceed them.
  6. Bridge Financing: Successful small businesses look for an opportunity to merge and acquire

The Three Determinants of a Successful Venture Capital Fund

  • Define your strategic goal

Any investor should initially focus on one of two main objectives of his investment: either to have a financial interest or a strategic interest.

So you must ask yourself whether the primary goal is to make a financial profit while gaining market insights and know-how, or is it to accelerate strategic engagement in business models that are likely to become large in the future and test a new market.

Since both goals require radically different settings and mindsets from one another, it is important to be aware of the expectations you have for action and to plan and act accordingly.

According to experts, experiences have shown that venture capital investments are more successful with minority stake participation where portfolio companies have sufficient freedom.

  • Don't put all your eggs in one basket

In addition to the efficiency and scope concerns that accompany VC funds, making investing in startups and individual ventures can still be risky, and while the potential for upside potential for a single investment is usually double what you would expect from publicly traded stocks, many things can go wrong. On the way, there is no free lunch in any kind of investment, except for diversification.

It is therefore very important for investing in startups to diversify the investment across multiple companies, sectors, funding stages and geographies to mitigate the default risk that rises for any startup.

  • Choose an investment that matches your previous investments

Most financial advisors may not like to invest in Venture Capital Funds, because in addition to not specializing in such investments, they always prefer to deal with already established businesses.

This is because until recently it was practically impossible or not economically feasible to integrate an emerging sector into a traditional investment portfolio, with unconventional risks involved due to the fiduciary nature, administrative overhead and several other factors.

Therefore, it is always better to invest in products or assets that match your existing investments so that you do not face great difficulties in integrating them. [2]

The difference between venture capital and angel investment

Both venture capitalists and angel investors are people who invest money in businesses, and each takes calculated risks when investing in the hope of achieving a healthy return on investment (ROI). But there are major differences between angel investing and daring investing, and these differences include:

  • The nature of the investor

Venture capital is a person or company that invests in small businesses, generally using funds raised from investment firms, large corporations, and pension funds. Typically, venture capitalists do not use their own money to invest in companies.

An angel investor is a person who relies on his own money to invest in a small business. An angel investor needs to have a net worth of at least $1 million and have an annual income of at least $200,000 to be considered an investor. Usually, the angel investor is a relative of the business owner. Small, whether from his family or friends.

  • Amount of capital

Another difference between an angel investor and a VC is the amount of business capital the investors are willing to provide.

Venture capitalists typically invest more money in a business than an angel investor, and according to the Small Business Administration, the average VC transaction is $11.7 million.

The average angel investment is $330,000, according to the American Small Business Association.

  • investment time

Also, the angel investor differs in the timing or stage at which you start paying into the business from the VC. If you are a small business owner and want to attract an investor to support your company, the investor you are appealing to will depend on whether you have already established the company or are just starting out.

Venture capitalists tend to invest in already established companies to reduce the risk of losing investments.

Angel investors are more likely to invest in companies that are just starting out, they usually choose a business they are interested in and can see that it will turn out to be profitable, even if the company has not yet established itself, which is why angel investors take on more risks than VCs.

  • The role of the investor in the business

Usually the owner of bold money seeks to own property or commercial rights or some kind of control over the way the project is managed, because he wants to make sure that he gets the highest return for his money, so he always seeks to create a board of directors for the company he works for, and demands a seat on this board, but in the end He does not care about the direction of work.

The angel investor often acts as a mentor to the business, making suggestions or helping to form contacts with banks and accountants and assisting in decision making. [3]

Venture Capital Funds in Saudi Arabia

Venture investment began to appear in the Kingdom since 2018 AD through the establishment of the Saudi Venture Investment Company, and in just two years, the venture investment grew by 124%.

The value of the investment in venture capital reached the rest of about 152 million dollars, and during the first half of 2021 AD, the value of the venture capital that was injected into Saudi startups amounted to about 168 million dollars.

Thus, the bold investment in the Kingdom has achieved a growth of 65% over the same period last year, and thus the Kingdom has approached the first country in the region in the region in the field of bold investment, which is the United Arab Emirates. [4]


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