The term venture capital is interpreted in different ways. It is a form of private equity capital which is provided to emerging or high growth potential companies. In fact they are expected to lend their support or expertise along with the capital to the invested companies. In return for the high risks which the venture capitalists undertaken, they have considerable amount of influence on the decisions of the company. The growth of countries like Malaysia has been due to a large influx of venture capital and that too particularly from the domestic or offshore areas. In financial terms venture capital is also known as risk capital. Some of the characteristics which are required in a venture capitalist are as follows
€ Well groomed management skills
€ Ability to take well informed decisions
€ Solid technological background as well as analytical skills of the highest order
€ Well knowledgeable also
Firms in Malaysia normally opt for this capital, even though the cost of acquiring is high. This is because it will be very difficult for a new firm to get any financial assistance from the market or raise money from the public. The need for this form of investment is all the more necessary in south Asian countries to bridge the gap between capital and knowledge along with utilization of maximum resources at the disposal.
The market in Malaysia is expected to grow in the year 2020 by up to 4.5 trillion. The expansion strategies are oriented towards expanding the role in the capital market and growth strategies needs to be formulated as far as market stability or investor protection is concerned. The objective of all these strategies is to make the country prepare to counter the challenges in the present decade. In addition to this initiatives will be taken to increase participation in Venture Capital Malaysia along with private equity industries by establishing a regulatory framework for the functioning of these industries.
There is a thin line of difference between this form of capital and private equity. Though they resemble a lot in similar, if you closely observe them the difference can be found. First and foremost private equity buys firms across all industries, whereas the venture firms are more focused on technological as well as bio tech or clean firms. The former is known to acquire a majority stake in a company, whereas the latter only acquires a part in it. Private equity uses a combination of equities and debts whereas the latter only focuses on the equity aspect.
To sum it up, the world is becoming a competitive place. Companies need to be all the more efficient as far as productivity or adaptability is concerned. There is a strong demand for quality and at the same time cost effective products.