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Venture Capital Accounting

What is Venture Capital Financing?

Venture Capital is financing provided to business start-ups with high growth potential. Although many of these investments typically have high-risk levels for investors, high returns are also possible and offset the risks. The investors are usually high net-worth individuals who can afford to take significantly higher risks associated with venture capital investments.

There are several stages involved with a business’s initial growth, where venture capital may be invested. A small amount — known as seed money — is invested with the intention of providing a proven business concept. Once product development has begun and market share is in the process of expansion, the venture capital investment amount is higher, and finance is dispensed in several rounds. Investors can recoup their investments by either selling the business to a larger company or by selling shares in the business at a public offering. One possible downside for investees is venture capital investors sometimes wanting board seats and can force some changes to be made in business management.

Gaining venture capital funding is not an easy task since, typically, venture capitalists are quite picky when selecting investees. What they are looking for are unique business plans, experienced management teams, and prospective rapid growth. Furthermore, they only invest in industries that already have a substantial level of expertise, usually due to previous investments in similar areas.

Venture Capital Accounting

Venture capital accounting can be very complex as there is usually a lot of money being exchanged for business investments, both for buying and selling.

What's more is, venture capital investment firms invest $10 million or less in numerous business startups with high growth potential. These firms will then exit by selling their shares in equity financing, mainly at initial public offerings (IPOs). Both private equity and venture capital firms have special accounting needs that include:

  • Venture capital tax planning that includes state, local, and international tax consulting services, strategy, and structure
  • Full-scope auditing
  • Financial modeling, projections, and other complex financial projects
  • Various business valuations and other business matters
  • Transaction advisory services
  • Executive search services
  • Systems development, such as accounting, internal control procedures, and budgetary systems
  • implementing computer systems, or maximizing existing systems
  • Internal audit assessments
  • Purchase price allocation
  • Develop cost-effective responses
  • Business advisory services
  • Due diligence preparedness for buyers and sellers
  • Access viability acquisitions by evaluating and implementing successful plans of acquisitions
  • Pre-transaction planning and evaluation
  • Opening balance sheet audit

That is a lot for a venture capital accountant to keep up with, which is why instead of having just one venture capital accountant to manage everything, most firms outsource these tasks to a venture capital accounting team.

Venture Capital Accountants

Our venture capital accountants ensure that our small business client’s finances are correctly established. When dealing with money invested in a business, investors want to be assured that they have the right advisers who can handle everything from venture capital accounting to venture capital tax planning. Our team of seasoned venture capital financial advisers provides value to investors with an understanding of the opportunities and challenges that growth may present so that entrepreneurs can focus on growing their business.

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This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.