Also known as venture capital partners, venture partners are individuals or entities that invest funds or other resources into a business venture started by another party. The idea behind this investment approach is to assist the new venture in establishing a presence in the marketplace, building up a significant clientele, and eventually achieving profitability. In return, the venture partner is compensated in some manner for his or her contributions. Depending on exactly how the venture partnership is arranged, there are several roles that venture partners may fill.
With some venture capital deals, venture partners do not become actively involved in the management and operation of the business in any way. Sometimes known as a silent or passive partner, this type of investor may simply contribute funds to the project, either as a lump sum on the front end or a series of payments over a period of time. With both approaches, venture partners eventually generate returns either by the repayment of the invested funds plus an agreed upon amount of interest, the receipt of stocks issued by the business, or a combination of the two.
Some venture partners do become actively involved in the operation and management of the business venture. In this scenario, an investor with past experience in financial matters, plant organization, or general operations may step forward to help create the basic company structure, oversee training of new employees, or otherwise assist the owners in structuring the business so that it stands a good chance of being profitable. Depending on the terms of the agreement between the investor and the project owners, a salary and benefits may be involved, or the investor may receive shares of stock once the company is approved to issue shares. As the company becomes more established and qualified employees are present to operate the business, venture partners usually begin to incrementally curtail the level of involvement in the day to day operation, while still retaining an interest in the business.
In the broadest sense, venture partners bring resources to a new business project, increasing the potential for the venture to become a success. As with any investment opportunity, there is some degree of risk involved, and should the venture fail the investor may lose all or part of those invested resources. Before becoming a venture partner in any project, it is a good idea to evaluate the needs of the project, determine the level of involvement that will take place, and weigh the risks with the projected returns. If the project appears to require a dedication of time and/or resources that the investor believes are not in line with the potential gains, declining to participate and seeking another project would be a good strategy.
