Although the short answer could be ‘no’, there is a range of venture capital companies that offer their shares to the public. It is, however, an exception rather than the rule and should be considered as such.
What is venture capital?
Before we discuss publicly traded venture capital firms, it will be useful to explain this term’s implications. After all, without a foundation in understanding, we might be explaining something that doesn’t make much sense.
Venture capital is financing offered to small businesses and start-up companies that have the potential for high, rapid growth and above-average returns. Usually funded by a range of wealthy investors, investment banks, or specialized VC funds, this investment opportunity is in greater part reserved for those, who are able to provide high volumes of funding without the risk of going under in case the investment fails. In other words, venture capital is invested in high-risk scenarios, expecting a greater return volume if the venture succeeds. It is worth mentioning that venture capital investing might include technical or managerial expertise rather than financial support.
Venture Capital Business
Of course, as with any other branch of investment, venture capital is a way of earning money. It is, above all, a business. Venture capital funds and companies generate profits by allowing small businesses and startups to scale and achieve success in the marketplace. For the investor, potential profits are often much higher than those of other investing opportunities (private equity funds, stock investments, etc.) but are also connected with a higher risk. By taking advantage of the early stage of the company’s growth, venture capital can generate the kind of return, which makes the risk worth taking.
Investing As a Non-Accredited Investor
The majority of venture capital firms rely on investments made by ‘accredited investors’. Although the definition will vary across the globe, a good estimate for an ‘accredited investor’ is the net worth of an individual exceeding a million dollars. This is, of course, just one of the determining factors, but it is the most popular one to consider. There are ways of becoming an accredited investor through certification, but the process is likely to include one’s financial statement as well.
A ‘non-accredited investor’ is an individual whose financial abilities are less secure, hence this type of individual is much less reliable in the long run than professional and self-certified investors. Venture capital companies, hedge funds, and private equity funds often have a range of restrictions dedicated to the non-accredited investor base. This is provided to reduce the risk of liquidity issues, in case the investor’s losses would render them unreliable.
Your ability to invest in a capital venture is closely related to your financial ability and net worth and should be taken into account when deciding upon this kind of high-risk investing. If you’d like to explore your venture capital investment prospects, book a call with our expert.
Venture Capital Investment UK
The UK’s market has become a hub for venture capital firms over the past decade. There are plenty to choose from and some of them do not expect you to be an ‘accredited investor’ to participate. These are mostly connected with ‘crowdfunding’ ventures and offer a lower range of investment batches to choose from.
Before you decide to invest in a venture capital firm or fund, you should seek consultation with your financial advisor and thoroughly research the company’s past performance and the management background of its leaders. This will allow you to make a better-informed decision. Alternatively, you can reach out to our team, who can assist you in the decision-making process.
How to Invest In Venture Capital Firms
For investors ready to invest in the venture capital sphere, there are many opportunities to choose from. Whether you’re an accredited investor or yet to become one, there is a range of funds, stocks, and direct investments to take into account.
In order to invest, you can either address one of the many venture capital companies (investing on the UK market) or register on one of the crowdfunding platforms for venture capital investments (investing in the UK market). There are many alternatives, both for affluent investors and those who want to experiment with capital venture investments for the first time. Your potential gains or losses will be closely related to the size of the invested funding, which is why accredited investors are more likely to be offered higher rates of reward. It should not, however, discourage you from trying. You have to start somewhere after all.
In A Nutshell
Venture capital investments are associated with higher risk but also higher rates of return. They are offered to both accredited and non-accredited investors, and those who wish to participate in this highly volatile sector of the market should be aware of the risks.
In the UK market, as well as in other markets (for example USA), there are opportunities for big and small investors to participate in venture capital investments. Whether via crowdfunding platforms or recognized venture capital firms, an investor is able to place their finances on the line in exchange for an above-average return, if the financed small business or start-up grows and thrives thanks to the added funding.
It is best to consider venture capital investments with the advice granted by either a financial advisor, our team’s partner experts, or someone fluent in the ‘language’ of investments. These investments are associated with a high risk of loss, which should be acknowledged and accepted before any financial commitment is made.
If you’d like to know more about the topic, feel free to book a consultation call with our expert. We are here to help you and inform you so you can make the best decision suitable for you.