In addition to some common methods of financing business mentioned in previous blog post, venture capital is known as popular effective way to finance big projects and entrepreneurs. The term “Venture Capital” (VC) was first introduced in United State with an establishment of American Research and Development (ARD) in 1946 by Karl Compton – a president of MIT University, Professor Georges F. Doriot of Harvard Business School and other Boston business leaders (Arnd Plagge, 2006). This kind of Fund is called Venture partly because it normally invests in large projects with high risks. Nowadays, VC has developed in many countries all over the world, especially in some developing countries where potential ideas are not expanded due to the limited financial sources. When investing in foreign countries, besides common risks that VCs possibly face, they always need to prepare in advance the currency related risks. Expressly, this kind of risk might be most noticeable in import-export trades and multinational firms.
Let’s take Vietnam as a case to examine what risks currency exchanges can cause to business. Over the last decade, the increase of inflation has strongly reduced the value of Vietnam Dong compared to other foreign currencies. Within only 7 years (from 2000 to 2007), the inflation rate in Vietnam went up dramatically from -0.6% to 12.6%. Although government had plans to reduce the inflation rate, it did not decline much and is forecasted to reach warning point.

Considering the idea that high inflation causes increase in products cost/price, the matter VCs might be worried about is the insufficient investment. Some investors (maybe, fortunately) foresee this risk and prepare the back-up plan in advance. Thus, they might overcome the problem. Considering the idea that high inflation causes increase in products cost/price, the matter VCs might be worried about is the insufficient investment. Some investors (maybe, fortunately) foresee this risk and prepare the back-up plan in advance. Thus, they might overcome the problem.
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