Want to know how market volatility affects venture capital?

Hi everyone
What a week!!

That market collapse was quite scary. We’re now seeing some recovery but the overall downward trend continues. So how does this impact on raising equity investment?

Venture capital companies raise parcels of money from the pension/superannuation funds. So those VCs who have a fund in place will continue to invest in the entrepreneurial market. Those who are trying to raise capital may find it more difficult to do so. That may mean some tightening on investment funds available.

Any rise in interest rates will also impact on your capital raising capacity. And with the threat of inflation there may well be an increase in interest rates. Investors are looking for 5 - 6 X Bond Rate in terms of return. If the Bond Rate goes up then you will need to demonstrate how investors will get the return they want. However,this is not an exact science and provides a guideline only.

But it stands to reason that if investors can get a high return on more secure investments then they may well leave the entrepreneur market and take the secure investments as a short term strategy until the market settles a little.

If you’re talking to investors ask them about funds availability and what they are doing in a general sense. Keep on track and continue your capital raising activities but be aware of what’s happening in the big market.

Cheers
Gail