Who invest money into venture or risky business? The structure of the sources of venture capital is characterized by strong country specificity, in other words, the consequence of special features of the legislative regulation of different states and the standards in the financial sphere are very important to investors of venture capital.
According to the statistics of the USA, these are, first of all, the Pension funds that received the right in 1979 to invest a very limited part of their financial means into investment projects with the increased degree of risk. Since then the Pension funds became the most stable American source of risky capital ensuring almost half of all new investment entering.
Among the sources of venture capital there are industrial and commercial corporations as well as insurance companies and different funds. Physical persons play the notable position in American venture business. Besides the material interest, the desire to support their relative or just friends who start their business is important for investors of risky programs. In this case the conditions of investment can be less rigid and more advantageous than by real professionals of venture business.
Probably, important individual investors of risky capital are called "angels" in business milieu. It is important to note that foreign, in particular, Japanese investors invested a great part of financial means into American venture funds (yearly approximately from 10% to 15%) at the beginning of the 90s.
The list of participants of venture funds is wider in the countries of Western Europe. There are state offices, commercial and clearing banks, universities and other sources. The characteristic feature of Western Europe is higher specific weight in venture business of bank structures. That's why, probably, the preferred orientation of West European investors is more traditional and less risky investment projects.
It is necessary to point out the participation of big industrial companies in the venture business. Many of them are interested in the use of mechanisms of risky financing for achievement the purposes of selected under the contemporary conditions strategy of scientific and technical development.
It is also necessary to consider that big companies are forced to track new promising developments in small business niche. Otherwise potential competitors can unexpectedly use them and this fact can destroy the equilibrium on the market at that moment.
There are three basic organizational forms of risky capital investments which big industrial corporations use.
The first form is direct venture financing of the activity of small innovation firms. As said above, this form has the greatest financial risk, however, it promises much higher return too. This return can be a size of an acquired stock packet or a possibility to obtain control over a new firm in the case of commercial success or technological breakthrough.
This organizational form of venture business was widely used in the 70s by big chemical and pharmaceutical companies for the support of new firms' projects that specialized on the genetic engineering in the biotechnology.
The second form is responsible for the establishment of a quasi-independent joint venture fund by means of the corporation. Its managers are the employees of the corporation or are real professionals of venture business. Though there are definite advantages, this form has some additional problems for the corporation.
It is necessary to make agreement its investment policy with the strategic policy of the corporation development. Difficulties with the selection between alternative investment projects sometimes appear.
Finally, the third basic form of the participation of big companies in the venture business is the entry of a partner with the limited responsibility into these "independent" venture funds which are created and are governed by professionals of risky capital investments. This form does not require great investments and management control that is specific for this kind of the activity.
At the same time the form facilitates the access to developments which each fund of small firms support. Furthermore, it gives the possibility to know everything about these projects, which are examined but then are rejected by managers of venture funds for different reasons.
There is no doubt that the development of venture business is profitable to the economy. This fact can be proved that private investors invested about $130 billion in the development of new promising firms, which proposed their shares on the fund market for the first time, in the USA only from 1990 until 1995. These means are invested, as a rule, for an increase in the course cost during the continuance.