Studies of the Spanish economy have been interested in the problems that some small and medium-sized companies have. Problems of various kinds, fiscal, financial, administrative, etc. These companies make up about 95% of the total number of companies in the country and generate 60% of the jobs, 65% of the sales and produce 40% of the goods that are exported.
Although small and medium-sized companies are not listed on the stock markets, which removes the opportunity to be financed by individuals and of course they are less competitive compared to other companies that do appear on those lists. They have fewer financing options and can only rely on themselves for profit to stay afloat. They depend on the property and assets that the owner can use to finance the business or use as collateral when requesting a short or long-term loan from a financial institution. It is in this context that we introduce the concept of venture capital.
We can talk about three big problems that small and medium-sized companies have when undertaking and that hinder their financial development. It’s a dependency cycle if you will. It is difficult for small businesses to obtain a loan from a bank, and because the bank does not trust their ability to pay, it sets high interest rates for them, putting them at a disadvantage compared to their competitors. For all these reasons, they cannot offer prices as competitive as other businesses. Once again, the only option for them is a financing structure like venture capital.
Venture capital is a way of capitalizing small and medium-sized companies, so its development is vital for the regeneration of the country’s industrial fabric.
Venture capital financing is an instrument aimed mainly at small and medium-sized companies, through which a company specialized in investing or not (investment company) injects capital into a small or medium-sized company (recipient company) in a minority manner and in a relatively short space of time.
If you prefer, we can understand venture capital as a financial formula that provides resources to companies, mainly small and medium-sized ones, in the form of long-term permanent funds or with the same risk as the funds provided by the employer, since they normally do not have warranty. or special benefit. It is important to find the right balance between the percentage of ownership and control of the company and the participation in the use of the different financial instruments.