Business Venture Definition: Everything You Need to Know
The business venture definition is a new business that is formed with a plan and expectation that financial gain will follow. 3 min read
The business venture definition is a new business that is formed with a plan and expectation that financial gain will follow. Often, this kind of business is referred to as a small business, as it typically begins with a small amount of financial resources.
A business venture is usually formed out of a need for a service or product that is lacking in the market. This need is often a product consumers are requesting or something that serves a particular purpose. After the need is determined, an investor or small-business person with the time and resources to develop and market the new service or product can start a business venture. Most likely, the development will be funded in its early stages by an investor, who is often the business owner or creator of the idea. Oftentimes, business ventures are funded by more than one investor, with the expectation that the plan will be profitable in time.
As the business gets off its feet, additional investors may become involved by providing support and capital to expand development and marketing of the venture. All this is done with the intention of sharing a substantial profit among all investors.
Small-Business Venture vs. Startup
The primary difference between startups and traditional business ventures is the way they consider growth. In contrast to traditional businesses, startups are designed to grow fast. This requires startups to have something to offer to a very large market, which is why most startups are tech companies. For most businesses, however, a large market is not a requirement. Generally, a business can sell to any market it can reach and serve.
Another common difference between startups and traditional businesses is the source of funding. Startups often rely on capital from angel investors or venture capital firms, while traditional small businesses typically rely on grants and loans. In general, those providing venture capital tend to take a more active role in the company they invest in, as opposed to small businesses, with whom lenders don't often play an active role. After all, investors take the biggest risks when it comes to business ventures, and as such, they are more likely to give advice and offer a helping hand.
As opposed to small businesses, startups also require an exit strategy. Investors will need to see their returns, often within a shorter timeframe than small businesses, which may be in business for decades or even longer. If you're hoping to attract venture capital without an exit strategy, you'll be unlikely to receive it.
Is a Startup the Right Type of Business Venture for You?
Considering whether a startup is the right type of business venture for you? Creators of startup companies must have a few key characteristics.
- You must enjoy working hard and then moving on. If you work enthusiastically and determinedly, yet you know you get bored easily, startups may be a good direction for you. Serial entrepreneurs are those with a handful of ideas they'd like to see through, and since startups generally have a short lifespan, these entrepreneurs may find that launching startup companies can fulfill many of these ideas.
- Does your product or service have a huge market, ideally in the millions? In order to grow rapidly, you're going to have to think big. The internet or digital realm could be a naturally expansive market if you have the right product or service to offer it.
- Startups may be a good idea if you'd like expert advice or assistance in your endeavor, as investors often play an active role in their development. For those who have never launched a business before, incubators and accelerators can provide more valuable assistance. Incubators offer support and guidance to assist startups in growing and thriving in an unstructured way, without any goals or timeline. On the other hand, accelerators provide a specific course of action within a short period of time to rapidly grow the value and size of a company in pursuit of a particular goal, typically funding. Both can be significant resources for the budding entrepreneur.
If you need help with your business venture, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.