Venture capital is defined as the capital or money which is invested in an upcoming business in an exchange for some percentage of the business. It is a type of financing new startups seek when looking for investments from private investors, banks, and/or other financial institutions. Recently, venture capital has been on the rise as many people view it as a way to fund their businesses and startups. It has also gained popularity due to popular shows like “Shark Tank” and “Dragons Den,” in which people present their businesses in front of well-off investors.
So if you are someone who is looking for people or financial institutions to invest in your startup, all you have to do is arrange a meeting and blow them away with a killer presentation with well-versed and thorough research about the market, your product, and the potential it holds. However, recently it has been believed that venture capitalists are not thinking straight when it comes to a new opportunity at hand; they see the potential that the product holds, and it is good enough to get them on the table, but there’s a lot more to it than that, which is why it is necessary to redefine venture capital.
Examining The Proposal
Right off the bat, there are certain things that a venture capitalist shouldn’t compromise on when it comes to selecting a business to invest in. Some of the areas of diligence can quickly turn sour if they are not addressed properly, such as the environment, inequality, labor, diversity, anti-corruption, and the stakeholders involved. Following are the questions that an investor should ask before jumping head-first.
- What are materials being used today, and what are the materials that will be used in five years? Are these materials ethically sourced or not?
- Does the company pay its workers a fair and livable wage, whether they are part-time or on a contractual basis?
- What potential impact will the company have on the job market, including skilled or unskilled, blue collar or white collar, local or international?
- What is the company’s stance on the data that they are receiving? Will it be further sold to a third party, or will the customers’ privacy be protected?
- And last but not least, will the company have healthy practices to engage in initiatives that will work to reduce discrimination and promote inclusivity, whether it is surrounding nationality, religion, race, gender, sexuality, and ability?
With these simple questions, you can get a clear picture of what the company will look like in a few years and whether this would be the kind of company you would want to associate yourself with or invest your hard-earned money in.
Redefining venture capitalism is not an easy task, but it is needed.
