Payton & Associates, LLC
Commercial Litigation Attorneys
Miami, Florida

Basics of venture capital investment

Many people in Florida have good ideas for businesses, but in order to convert those ideas into actual businesses the owners will need money to get them off the ground. This is because businesses oftentimes will need money not only to develop a product, but also to obtain a place where they can have offices, warehouses and other needs for their business. Therefore, these young companies will need to either purchase or lease commercial real estate.

However, many small business owners do not have enough capital to pay for all the upfront costs. So, many companies are funded by venture capital investors. The very basic way that these arrangements operate is that the venture capitalist will invest the money the company needs to get started in exchange for some sort of ownership, usually in the form of stock in the company, or some other return on their investment.

These people or businesses are taking a risk though because there is no absolute guarantee that the business will be successful. So, in exchange for their risk, they oftentimes will seek certain rights beyond just the ownership of stock. They may request that they have a vote for the board of directors or receive financial reports. They may also request that they always have the opportunity to maintain their percentage of ownership in the company if more stocks are sold in the future. The company usually also has to provide the investor with the operational and financial outlook of the company, and all representations made must be accurate to the best of their knowledge at the time.

Most potential business owners in Florida need money to start their company and give it the opportunity to be successful. Therefore, many look to venture capitalists who are willing to invest in their company. Once the company has the investment, they can then use the money to pay for their various needs, which usually starts with finding commercial real estate, so they have a place to operate the business. These can be very complicated agreements, though, and it is important that they are drafted correctly to ensure all parties are protected.

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