IndexAccounting principlesLegal requirementsFinancial statementsCategorization of venture capital financing The formative phase. next phase mezzanine phase financing investments in development capital difficulties. mergers and acquisitions / sales and acquisitionsFinancingFeaturesIlliquidityBibliographyVenture capital is the activity that provides capital, advice, networks and support to the company and entrepreneurs who have high growth potential and who are trying. It has existed in various forms for centuries or more. It finances from small start-ups to companies that want to expand but cannot yet access financing due to strict stock market regulations. The returns are incredibly rewarding and fantastic. Even more rewarding is the personal pleasure of seeing amazing people who believe in creating new businesses and amazing products for the world. But there are always 2 sides of a coin. Startups and businesses backed by venture capitalists have an incredibly high failure rate due to various variables that create uncertainties in the market that cannot be reversed or are not under their control. More importantly, they are providing unsecured loans. It is said that out of 10 businesses funded by venture capitalists, 7 businesses or ideas fail badly, of the remaining three, two break even and the remaining 1 idea creates a huge return that exceeds and covers all losses. and in addition to that it generates tons of profit. The companies in which venture capital invests are called portfolio companies. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay Every fund has its own fund manager. When venture funds invest in these funds. In exchange for the funding, provided they ask for an equity stake in the company, they get access to a seat on the board of directors of the startup or respective venture, sometimes even playing an active role in managing the company's operations. They provide monetary assistance, using their experience and the resources they have at their disposal. The first venture capital firms were started in America in the early to mid-1900s. A Frenchman named Doriot Georges moved to the United States to earn a degree in economics and became a teacher at Harvard business school and began work at an investment bank. He found the first publicly owned venture capital firm called American Research, and Development Corporation (ARDC). The ARDC was notable because for the first time a startup or business could raise funds from private sources other than wealthy families. families like the Rockefellers or the Vanderbilts were the ones who provided money to businesses and start-ups and provided capital for expansion. ARDC had millions in its account from educational institutions and insurers. Accounting standards The accounting of venture capital funds can also be affected by the amount of control the fund has over an entity. For example, under UK Generally Accepted Accounting Principles (GAAP), equity accounting is required if the investment gives the fund an influential minority stake (20 to 50%) in the company and is not held as part of a broader portfolio, while US GAAP does not require equity accounting for influential minority positions. In contrast, International Financial Reporting Standards (IFRS) require equity accounting for influential minority positions when they are not valued fairly through profit and loss. Legal requirements Venture fundsform a limited partnership and various limited liability companies to obtain tax benefits Venture capital constitutes, wealthy individuals, institutional buyers, insurance companies, pension funds, investment banks, dedicated venture capital funds, corporate pensions. Entrepreneurs and entrepreneurs who cannot get a loan from the bank due to their high uncertainty but their idea of ​​quality are usually supported by these funds. All partners have partial ownership of the fund, but the venture capital fund and its manager decide the day-to-day operation of the company and where to invest the fund. The venture capital firm acts as the general partner while everyone else acts as limited partners. The fund itself is usually structured as an LP, which takes on the LLC as the GP. Cash flow statement The cash flow statement prepared for interested parties varies accordingly according to the accounting standard. The venture capital fund has the same accounting as the private equity fund. In America, they are prepared according to Generally Accepted Accounting Principles (US GAAP). Since most funds are based in the United States, they must follow the AICPA (AMERICAN INSTITUE OF CERTIFIED PUBLIC ACCOUNTANTS AUDIT AND ACCOUNTING GUIDE). Includes cash flow, profit and loss and balance sheet, investment schedule and other financial highlights lists. If the venture fund is based outside the United States, it must report in accordance with International Financial Reporting Standards (IFRS). In which they have to submit the PROFIT AND LOSSES statement, the balance sheet statement, the operating statement, the cash flow statement, note highlights and a statement of changes in equity. As a result, traditional savvy VCs have had to keep pace, and many have raised larger follow-on funds – and at a faster pace – to support growing startups, where unicorns and mega deals are having a big impact. California, Massachusetts and New York have the largest venture capital deals. They contribute 79% of business in America. For managers, compensation fees equal to 2% of the total risk fund amount must be paid each year. In addition to that, approximately 20% of the profit goes to the general partner, while the remaining profit is distributed among the limited partners according to their ownership share. Categorization of venture capital financing The formative phase refers to investments made in a project in the early period and includes three distinct phases: Angel investing: refers to investments made very early in the life of a company. Often the idea phase and funds here are used for business plans and to evaluate market potential. The funding source can be individuals or managed funds. Seed Phase: Refers to investments made for product development, marketing and market research. This is the phase during which venture capital funds make initial investments, through ordinary or convertible preferred shares. Early stage: Refers to an investment made to finance commercial production and initial sales. Next stageinvestment refers to a development stage in which a company already has production and sales and operates as a business entity. Funds provided at this stage are typically used for expansion and scale-up funding of the mezzanine stage of marketing campaigns – this refers to the capital provided to prepare the company for an IPO. The term refers to the timing of the financing rather than the type of financing. Development capital refers to the provision of capital for