What Is Healthcare Venture Capital?

Jim B.
Jim B.
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Businessman giving a thumbs-up

Healthcare venture capital is a term that refers to the capital put up by investors as a means of funding a startup or growing company in the healthcare industry. This industry is an increasingly attractive one to venture capital investors because of the vast variety of companies that comprise this field and because of the potential to get in on the ground floor of a potentially lucrative company. Investors seek out healthcare venture capital as a way to possibly gain partial ownership of these companies. The company owners need venture capital to give them the initial funds to get started, even if it means eventually relinquishing some control of their companies.

Investors who want to become involved in the healthcare industry can buy stock in companies within the industry. Many companies that are just beginning their operations, however, aren't yet traded publicly. Some of these nascent companies may need funds to roll out a new product or develop some new technologies. Since these companies often have the potential to make great advances in the healthcare field, they are highly coveted by some investors. As a result, healthcare venture capital can be extremely beneficial to both companies and investors.

The healthcare industry is extremely vast; it offers many possibilities for healthcare venture capital investors. They may choose to become involved with pharmaceutical companies with new patents for drugs, or they can seek out companies developing new medical devices. In addition, there are many companies involved in providing healthcare directly to individuals which may be valuable assets to investors.

For investors, healthcare venture capital is not only potentially financially rewarding, but can also provide a sense that their capital is making a difference and improving people's lives. These investors generally pay a significant minimum fee to become involved with a venture capital group, which then seeks out the young companies in need of some financial help. Investors are often rewarded with an ownership share in these companies, which can be extremely lucrative down the road if the companies prosper.

In the case of the companies themselves, healthcare venture capital can often provide the impetus to allow them to become major players in the industry. There is a trade-off involved with such an investment deal. Many venture capital arrangements allow investors to influence the future business decisions of the companies. Ceding some control over the business they founded can be difficult for company owners, but it is often necessary if they are to acquire the funds they need to be competitive.

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