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QUICK + EASY way Learn Venture Capital even high schooler can understand

Welcome to professrsavings.com, we teach finance basics.

Today we will teach what venture capital is even a college kid would understand.

Hi I’m Rayfil Wong.  We hope these investment concepts will help you be a better investor.

Venture capital is a word often heard especially in the tech entrepreneur community especially stories of a young whiz kids who started a social network  

It is simple is money invested in early-stage firms and small businesses with growth potential. 

The reason why venture capital is so valuable for startups is because they often don’t have an operating history so going to a bank for a big loan is nearly impossible. 

Venture capital investments are risky since there is a high rate of failure in startup for many reasons but venture capitalist can earn impressive returns with a major big hit such as Google or Facebook.

Venture capitalist exchange capital or cash to entrepreneurs and their company in exchange for a portion of the equity or ownership of their company.

Venture capitalist may also have  the ability to influence the direction of the company if they have a board seat.

Let’s say that Professor Savings wants to create the next lending mobile application and is seeking $1million dollars and get that amount for a venture capitalist.

In exchange, Professor Savings would need to give up 20% of his company to the venture capitalist. 

Let’s say that the lending application is a massive success and seven years later sells to a major bank for $50 million dollars.  The venture capitalist with 20% of ownership will receive $10 million dollars.  So in seven years time, the venture capitalist investment of $1 million dollars has a $10 million dollar return or 10x.

Professor Savings signing out. Make sure you subscribe to our channel so you can learn more about finance basics.

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