VENTURE capital (VC) is more than just money given to finance business growth.

Some business owners are not receptive to the idea of obtaining VC. They are concerned that their hands would be tied when venture capitalists are involved in the business.

VC partners are actively involved in the companies, typically taking a board seat. With a start-up, daily interaction with the management team is common.

Like it or not, sole proprietors tend to see this as interfering, instead of helping, given that the VC partners may not know the business well.

“When you have VC involvement, you can't manage your business like a coffee shop. If they can't change their business mindset, we won't invest,” said Malaysian Venture Capital and Private Equity Association chairman Azam Azman.

Having taken the risks of providing fresh funds to start-ups that may not qualify for bank borrowings, venture capitalists definitely have to monitor their investee companies closely.

First and foremost, the VC funds want to see financial discipline in their investee companies.

“While you are building your dream business, you must also make sure that you don't burn too much money too fast,” said BI Walden Management Ketiga Sdn Bhd executive director Chok Kwee Bee.

Chok's VC fund had invested in a digital advertising company for seven years before it yielded returns.

When Chok joined the VC industry in 2000 during the Internet boom, young IT business owners told her that she was too conservative.

She realised then that some business owners did not like the “hand-holding process”.

“Financial discipline is important to us. But our views can always be challenged. As long as they (investee companies) spend their money wisely, we are fine with it,” she added.

So, venture capitalists aren't that unreasonable and stubborn all the time. They do give some leeway to the business owners.

Unlike banks, VC partners do not take any collateral for the funds they provide investee companies.

“We have to safeguard our investments. We are responsible for our clients' money,” said OSK Ventures International Bhd chief operating officer Eddie Yap.

On a positive note, venture capitalists could be a guiding force for the investee company to move towards greater financial discipline and better corporate governance.

More importantly, having a venture capitalist in the boardroom may help management make more rationale decisions.

Green Packet Bhd is a VC-funded company, which floated its shares on Mesdaq a few years ago and transferred to the main board this year. OSK Ventures International and Kumpulan Modal Perdana Sdn Bhd are the two VC firms which invested in Green Packet.

In addition to funding, Green Packet founder Puan Chan Cheong, who is also the company's managing director and CEO, turned to VC firms to tap their network of contacts for business opportunities.

And he believes that VC involvement serves as a good credential for the company.

“VC companies can provide experience and advice from various perspectives for business strategy and future investments that are valuable to a start-up firm,” Puan said.

Speaking from experience, Puan said it was important to have a “two-way, open and transparent relationship”.

“Maintaining good ties with your VC partners would enable them to offer high level advice.

“There will also be better sharing of vision between the VC firms and the investee company with the objective of growing a successful enterprise,” he added.

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