Sourcing Funds from Venture Capitalists, Creditors, Bonds & Equities Essay

Sourcing Funds from Venture Capitalists, Creditors, Bonds & Equities - Essay ExampleFunds are collected with nigh business objects to realize the benefits of current innovations in the form of product launch, market campaigns, investments in profit making financial instruments, funding running projects with assured returns (like organization projects bagged against tenders, infrastructure projects, conflict-free projects that have realized large payments prior to funding), etc. and invest the equities thus built (as an outcome of profits realized from projects) into diversifications, expansions, raw Plant & Machinery purchase, new business initiatives, etc. This means that the primary objective of funding should be to invest in profit making ventures that can increase the valuation of the assets of the friendship and hence result in profits for the investors & in the process improve of share holder value. Faure-Grimaud and Gromb (2004. pp986-987) presented that block of funds r aised by a heap is controlled by insiders for the purpose of improving asset valuation of the corporation by allocating corporate resources or acquiring new resources. In the process of increasing firms asset valuation, the shareholders increase their own wealth as well but this should be viewed more as an incentive of the shareholders tangible value-increasing actions and not as the fundamental objective of fund raising.Amihud and Garbade et al. (1999. pp453) argued that after a company has taken the debt, a conflict of interest arises between creditors, managers and shareholders. Managers are forced by share holders to maximize their wealth and in this process whitethorn end up maximizing risk taking activities. Example, shareholders may be tempted to invest the debt (rather than equity) in high risk projects that may maximize equity at the cost of debt at the cost of overall devaluation of the company. These conflicts call for effective corporate governance which requires lot of contribution by finance managers. They have to manage the compromise between creditors and shareholders by keeping the former satisfied with the investment portfolio while controlling the wish list of the shareholders.Sources of Funds for sale in Europe (including Croatia)Bottazzi and Rin et al. (2002. 239-244) reported the source of long term funding in Europe (Croatia included) as the Venture Capitalist funding from Institutional Investors (includes endowments & premium funds), corporations, financial institutions (includes primarily banks, insurance companies and fund raisers from capital markets), Government and individuals. Unlike US, Europe has shown dismal maturity when it comes to venture capitalism as compared to US. This is understood from the occurrence that the funding contribution in US is largely by Institutional Investors (shows the maturity of US markets) but in Europe is largely from banks that control a major part of the mutual fund industry. There are many ban k funded companies in Europe (having operations in