Risk capital is funding for firms with excellent growth potential.
Risk capital is provided most of the time by venture capital firms or other investors that are willing to take a big risk with the potential for a huge financial gain. Most of the time regular lending institutions like banks will not provide capital for a risky business model, so that is why businesses of this nature have to seek to gain risk capital from investors.
These investors are looking for returns greater than 30 percent on the original investments. They are very picky as to whether or not they will invest in your business model, so make sure you have created an excellent business plan which clearly defines your business, the market for your product or service, how much money you need, and a detailed description of how that money will be spent.
The proper planning will really help the investor make a wise choice about your business. Make sure that the market is large enough to spend at least $1 billion before you approach an investor. They want to invest in markets with a lot of potentials.
Your chances of also obtaining risk capital will increase tremendously if you have a unique product or service that you are marketing to a large group of buyers. There is a much greater potential for a large return if the product is unique and the competition is scarce or non-existent.