Why is venture capital particularly important for high-tech?

Why is venture capital particularly important for high-tech, scientific and technological companies? Introduction of new technologies is linked to high initial costs, but as sales grow, the costs are decreasing, and consumers are better off. Innovation does always imply risks, with inevitable losses to be carried on the way, but the return of such investments is potentially much higher. One successful project may pay for a number of dead-end.

Thus, hi-tech, scientific and technological companies that received a powerful impetus at an early stage (in the form of financing, good management or marketing strategy) can obtain the largest market share and become standards’ leaders. All this is possible even if the winning technology is not superior to its competitors.. Obviously, the newly emerged technological companyor simply the new high-tech project has no chances in winning the competition through organic development of retained earnings, which is typical for traditional sectors. At the same time, bank loans also cannot be considered as the main source of investments during the early stages of hi-tech company’s or project’s development. This can be explained by several factors: a new company is always characterized by a high level of risk; its creators often have no good credit history and cannot provide an adequate security deposit; the assessment of potential market is sometimes troublesome. Another problem is that owners of hi-tech companies or authors of inventions or patents sometimes have no financial and managerial skills.

In accordance with this the role of venture capital is of paramount importance. Oweners of venture funds do not simply invest money in new companies and know-hows, but also attract a pool of high caliber experts covering major technology clusters. They invite leading specialists, serial entrepreneurs, and tech visionaries and provide venture funds’ partners with value-added counseling and support.

The majority of technological revolutions in the world were initiated by firms who received venture capital investments; thanks to the support of venture capital, the following companies achieved great success recently: Apple Computers, Compaq, Sun Microsystems, Federal Express, Microsoft, Lotus, Intel and Netscape.
Venture capital supports the most dynamically developing industries to ensure the international competitiveness of the country.

In Russia, venture capital has been emerging and might potentially become a major source of financing for the commercialization of scientific and technological developments.

The potential for technology innovation arising from Russia is tremendous. Venture capital investments will make possible the development of new industries such as hydrogen engineering, biotechnologies, nanotechnologies, lasers etc. Our objective as the venture capital fund is to help catalyze and accelerate that potential into action that will have positive impact first of all on the Russian and global marketplaces.