Advantages Of Venture Capital

• Fuels innovation by investing in ideas.
• Venture capital is long term capital, which provides a solid base for the future growth of the company. As there are no periodic cash payments to be made (like payment of interest in case of a bank loan), it helps the company in investing its cashflow in the growth of business rather than the financing charges.
• VC backed companies have more credibility in the market giving confidence to all stakeholders of the business (employees, vendors, customers). VCs are very selective in investing in companies and do a thorough validation of the business model and the venture dynamics. They are also very aware of what the market wants and what is likely to succeed given their view of the market play. So a venture which gets funded by a VC signals to the market that the business concept is a good risk.
• The return which the VC makes depends on the value that the business creates for its shareholders. Being one of the shareholders, the VC is committed to the success of the business as it would make money only by selling its shares at a much higher valuation than what it had acquired them for. This goal congruence between the VC and the entrepreneur results in a higher probability of the success of the venture.
• VCs are a valuable source of business advice, which might otherwise not be available to the entrepreneur. VCs are vastly experienced professionals who have seen various tricky situations in business. The lessons they have learned become available to the entrepreneur, helping him to navigate adroitly in the entrepreneurial waters. 
• VCs' network of contacts become available to the entrepreneur. This facilitates recruitment of key employees, developing strategic alliances, entry into new markets, buying and selling business segments, etc.
• Entrepreneurs are typically people with ideas and management skills. What they lack is the money to make their ideas work. In VCs, they get a partner with money who is as committed as them to make the business succeed. Also, in the likelihood of more money being required, there is comfort in having the VC, as it is likely to provide additional rounds of funding or syndicate venture capital from other VCs.

Disadvantages Of Venture Capital

Venture capital is not available for all types of businesses. If the business is expecting   high growth, it will be difficult to attract such funding. As the VCs are looking to exit within a specified time frame, any business which cannot provide the exit within that time period is unlikely to get venture capital funding.

• The entrepreneur becomes accountable to the VC. The freedom of the earlier days of the business will be missing for the entrepreneur. Also, there may be a conflict if the VC has strong views on fundamental issues (like the strategic direction of the business) which fall in the domain of the entrepreneur.
• If the VC is too eager to exit early, he may influence the entrepreneur to sacrifice the long-term future for his short-term benefit. Also, the VC may pressurize the entrepreneur to aim for unachievable targets to ensure early exit for himself.
• VCs may take control of the business if it is not doing well or if they think that the management is unable to achieve the real potential of the business.