Venture Capital Investment: Worth the Risk? Long Term Benefits Can Tip the Scales in Favor of This Type of Financing

Hofman, Clement L., American Banker

Venture capital investments represent the financial grist for the development of new technologies in American industries. Through venture capital subsidiaries, banking organizations are capable of providing the financial catalyst for those fast-growing "new generation" companies.

Venture capital activity can achieve two significant objectives that are critical to preparing banking organizations for operating in a deregulated environment.

A venture capital subsidiary can be a substantial source of other operating income for its banking parent, alleviating some of the impact deregulation of interest rates has had on a bank's net interest income. Income from the sale of securities resulting from venture capital investments is typically taxed at the long-term capital gains rate.

A venture capital arm also can serve as a marketing tool for growing banks. As such, it is capable of projecting a progressive image for a bank holding company to small- and medium-sized companies that are experiencing an …

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Publication information: Article title: Venture Capital Investment: Worth the Risk? Long Term Benefits Can Tip the Scales in Favor of This Type of Financing. Contributors: Hofman, Clement L. - Author. Magazine title: American Banker. Volume: 149. Publication date: July 31, 1984. Page number: 34+. © 2009 SourceMedia, Inc. COPYRIGHT 1984 Gale Group.

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