Venture Capital – The Advantage and Disadvantages of Venture Capital3 min read
Joint venture businesses are composed of two or more companies, groups or individual businessmen or businesses. The join each other to create a much better or a new business line, hence the name joint. Today, a lot of businesses have been joint venturing with other businesses and companies for numerous benefits. Although the benefits are obvious, there are still some disadvantages when joint venturing.
Joint venture has lots of benefits; one of the most obvious is that you can survive financial crisis or depression because your venture partners can absorb some of your financial crisis to retain the company in shape. Usually this venture is being done to eliminate some or totally eliminate the competition to achieve a monopolized market for your business.
Another reason for businesses to have a joint venture is to have a different line or target market. This is to enable the company, usually a much bigger one, to target other market other than their present market. This enables the company to enter a new line of business and learn more about the products that they are going to create from their joint partners. This is very beneficial especially for those companies that jointed with other companies that have trade secrets or patented products and intellectual properties. They can now gain access to this valuable information that could help them and their partners expand their business.
Upon entering a new market, this venture not only allows the other company to enter and penetrate the market of the other, it also helps the other companies’ capabilities with handling the market. This makes the company a much bigger and better competitor if not the best in their specific market. Giving them full and great access and flexibility with their target market.
Joint venture capital also helps the company grow faster. This is because of the number of business lines that they have. This enables them to profit from different markets. For the part of the company that a market fails, the total failure is being absorbed by the entire venture capitalists. This works equally the same by the time they gain profit.
Although there are numerous advantages of joint venturing, there are some disadvantages too. One is that if your business partners were not as productive as your business. This will become a drag for you since you will equally share and endure the drawback of the other business. Another is you will have to share all the information that you have to your partners. And finally, if your business partners are not as effective or work efficient as you are. This may affect the management area of your business and may result to lower success of success. Besides that the power to govern your business is no longer solely to your company, but for the whole joint ventured companies.
Overall, joint venturing is a nice thing to do if you plan on expanding and growing your business much faster and if you intend on having different lines of market. Just a simple reminder, learn more about the partners you are going to have your joint venture. Choosing the right business or company can lead to success and vice versa.