Over the past decade, the venture capital industry has experienced a Compound Annual Growth Rate (CAGR) of 17% resulting in global annual investments exceeding $250 billion. Most of the investments in this industry are channeled to fintech and software startups, niches that have proven to be lucrative.
Despite the growth and potential within the venture capital space, the industry has some challenges. Key among them are governance and compliance. Read on to learn about the compliance constraints venture capital firms face and how to address them.
Governance and Compliance in Venture Capital
In many cases, venture capital firms invest not just in startups but in ideas that have disruptive potential but are yet untested. As such, these investments carry a higher risk than those involving businesses that have been in operation for some time.
In light of such risks, there’s often a tendency of rule-breaking and disregard for governance and compliance among venture capital firms. Though there aren’t any specific regulations for the management of VC firms, the principles that apply to other corporations should be adhered to. However, this has not been happening and has resulted in increased scrutiny of the sector and calls for stricter guidelines.
There’s no doubt that industry-specific regulations will be set for venture capital firms and violations will carry significant ramifications. This is why venture capital firms need to embark on the journey towards compliance today. Primarily, the objective should be to develop reliable and effective governance structures, a framework for financial reporting, and transparency with investors and partners.
Compliance goes hand in hand with accountability, which calls for high standards of information storage and maintenance. FileJet is the one-stop-shop for file storage, maintenance, and processing for professionals and entities. Get in touch with us to schedule a demo and find out how we can make compliance worries a thing of the past for your venture capital firm.