How to boost your startup thanks to Joint Venture
What is it and how can this business alternative help your company grow and how to do it safely. Read this post NOW! #joinventure
A joint venture, strategic alliance or business alliance or consortium, also known as a joint venture, is a type of long-term joint investment business arrangement between two or more persons, who are referred to as venturers or partners.
JOINT VENTURE: WHAT IS IT AND HOW CAN IT BOOST A STARTUP?
The content of the contract between the parties is what will determine the type of JV that is established. As a common denominator, all classifications share the allocation of economic responsibilities, resources and, of course, knowledge.
Thus, and without discriminating against other definitions in the extensive literature on the subject, we can find Joint Ventures:
Co-investment: companies put a large amount of resources in the same direction to generate greater shared benefits in new markets or environments with economies of scale.
Concentrative: those in which the core business and operations are relocated under a centralized corporate command, in order to optimize time and resources.
BOT (Build/Operate/Transfer): also known as investment JVs, these JVs are based on the need to develop specific economic activities.
Strategic: the parties do not add capital, but make it directly available to the contractors to materialize the efforts needed to achieve the objectives.
Equity Joint Ventures (EJV): a new parallel company is created with its own legal personality, which will not affect each of the companies, and which will serve as a shared executing arm of the interests of the agreement. It is useful when it comes to sharing tax payments.
Non-Equity Ventures (NEV): instead of incorporating a company, the parties sign a series of collaboration contracts with clauses defining the responsibilities of each party.
Horizontal, vertical and conglomerates: depending on whether they belong to the same stage of the value chain, to different stages or directly to different economic activities.
Joint VEnture EXAMPLES
There are many examples of successful joint ventures, both internationally and domestically and many of them are very famous such as:
- Ebay and Paypal.
- Nokia and Siemens.
- Sony Ericsson.
- McDonald’s and Coca-Cola.
- Bosch and Finish.
- El Corte Inglés and Starbucks.
- Burger King and Quick Meals Ibérica.
main disadvantages of joint ventures:
High capital: First and importante point, each company must make a large capital contribution.
Conflict of interest: situations may occur that were not foreseen and may cause conflicts, which will slow down decision-making and delay the achievement of objectives.
Valuation of each of the parties: it is essential to fix the distribution of profits when the initial investment is made; in this way, none of the parties will want to receive a higher percentage than stipulated from the beginning.