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Venture Capital

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Go4Funding.com is a platform to bring entrepreneurs, business owners and investors (angel investors and venture capitalists) closer together.

Go4Funding.com is a platform to bring entrepreneurs, business owners and investors (angel investors and venture capitalists) closer together.

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Venture Capital Venture Capital Document Transcript

  • Venture Capital A venture capitalist (VC) is a person who provides equity financing to companies with high growth potential. The money that a venture capitalist invests in a company is called venture capital. Venture capital firms are often limited partnerships that comprise a few venture capitalists. Each venture capital firm manages a venture fund, which is often comprised of a large pool of money--anywhere from $25 million to $1 billion--that the firm invests in growth companies. A venture capital fund consisting of third-party investments can finance enterprises that are too risky for debt financing. Each VC firm invests in several companies and this group of companies is called the firm’s portfolio companies or portfolio. Most VC firms have different kinds of executives: general partners, limited partners, venture partners and entrepreneurs-in-residence apart from associates and office staff. General partners are the primary investment professionals in a firm. General partners collaboratively manage the firm’s venture fund. Limited partners are the individuals who invest in the venture fund. Venture partners bring in deals and receive income on deals they mark. General partners on the other hand receive income on all deals. Entrepreneurs in Residence are domain-specific experts who perform due diligence on potential deals. These individuals are temporarily engaged by VC firms for a short period. Typically, they are expected to conceptualize startup ideas or move on to a CEO or CTO role at a portfolio company. Source Of Funding For VCs Venture capitalists invest in several projects at a time and most of them invest in large projects worth a few million. Most venture capitalists get their money from various institutional and pension fund investors. Like other investors, venture capitalists also go through a process of raising funds. They do this by raising funds from foundations, endowment funds and retirement funds. Venture capitalists then divest these funds into companies that they think will grow to make a profit. Most VCs try to invest in several businesses at a time to limit their risk. Venture capitalists look for big returns on their investments and are usually very selective about the projects in which they invest. There are several different types of venture capitalists. Some of them like to concentrate on providing seed money for a new business venture while others prefer to invest in companies that have already matured and are now in the expansion phase. Venture capitalists are also choosy about the business that they invest in. Some VCs are specific about investing only in technology companies while others don't mind investing in varied companies. Venture Capitalists like to remain part of the equation in the operation of the company business. Some venture capitalists like to know about the other sources of funding for a company. In many cases, venture capitalists look at the long-term picture and if the business grows according to the plan, it may receive several rounds of funding. However, business owners need to account for all the funding during the initial talks with venture capitalists. Many venture capitalists also like to become involved in the business, providing their experience and expertise in the industry. This is, in part, because venture capitalists are investing the money of other people or institutions. To obtain venture capitalist funding business owners need to show a clear business plan with a clear vision that shows the possibility of the company making a profit.