adminVenture capital financing is private equity capital that can be provided to start-up and small to medium enterprises with strong growth potential.
Types of venture capital financing
The venture capital concept is not fully developed in Zimbabwe as it is a new concept in most developing countries and their results are very limited due to a number of factors.
Venture capital financing has different characteristics and is used to finance businesses at different levels of development. This week we shall focus on the types of venture capital financing in Zimbabwe.
Government venture capital fund: This is credited to the role played by the government in promoting the development of Small to Medium Enterprises (SMEs). Various arms of government invest in small businesses for several reasons which include promoting innovation and public policy goals such as employment creation.
A total of ZWL$500 million has been set aside by the government for the establishment of a National Venture Capital Fund to finance start-up projects by the youths.
Independent partnership venture fund: These are independent investment firms which raise capital from pension plans, foundations and endowments. Their main goal is to maximise financial return on start-up companies.
In Zimbabwe there were venture capital firms which were mainly independent partnerships or private equity funds and most of them closed due to the economic downturn and only a few continue to exist.
Financial venture capital fund: This type of venture capital relates to financial institutions such as banks, insurance companies and pension funds. It is anticipated that businesses financed by and associated to financial venture capital are likely to get debt financing. However, financial institutions normally prefer not to commit their funds in high risk businesses for a long period .
Corporate venture capital fund: This is the practise of directly investing corporate funds into external start-up companies. Corporate venture capital firms provide funding to start-up companies during numerous phases of development.
Online Reporter