The History of Venture Capital

1. History and Impact of Venture Capital since 2000

2. Introduction
• Venture capital’s primary purpose is to provide financial support to start-ups with a high
potential of developing into high profiting enterprises (Sathe & Tyabji, 2010).
• VC firms ensure innovators, inventors, scientists, and people with big ideas are given the
financial support they require to develop their dreams into something practical
• VC is the framework for the great innovation, technological advancement, and economy
• Examples of companies funded by the industry such as Facebook have emerged as the top
companies in the entire world

3. How Venture Capital Firms are Structured
 VC firms have different forms which are mainly influenced by the markets of the institutional
venture capital
 The most common type is the venture capital limited partnership with captive venture capital
funds and government venture capital funds as the other two forms
 A limited venture capital partnership comprises five to eight general partners who are the
firm's founders (Sathe & Tyabji, 2010).
 The investors, limited partners, the primary role is to provide funding, and they are usually
wealthy people, university endowments, pension funds, and other institutional investors
.

4. Identifying Potential Investment Opportunities
 VC firms identify potential investment opportunities through deal flows, investment factors,
and financial potentials of the startup
 Deal flow refers to the firm's network, mainly contributed by former workmates, investors,
university professors, and referrals from the entrepreneurs they have worked with (Gompers et
al., 2019).
 The major investment factors the venture capitalists consider are the business model of the
startup. The financial outcomes of the business refer to the rate of return and its feasibility
 A firm that shows the potential of generating more benefits is likely to be selected above others,
and such skills require experience and knowledge about the industry (Gompers et al., 2019)

5. Industry Size and Major Players
 •The VC industry is estimated to be worth $ 49.9 billion, currently has raised a massive
amount of 130 billion funds in the year 2020 (Ibis, 2021).
 Ranking at the twenty-fifth position in the finance and insurance industry and the two
hundred and fifth-most extensive in the country, the industry is undoubtedly among the major
players in the country.
 Many firms have been successful in the industry with great global recognition, including
Intel capita, Accel Partners, Sequoia Partners, Khosla Ventures, Bessemer Venture, Tiger
Global Movement, and New Enterprise Associates (Ibis, 2021).

6. Trends in Terms of Growth and Fund Size
 The venture capital industry is growing at five point one percent annually in the overall
United States market showing helpful reports for investment in the sector.
 The most remarkable growth rate has been between 2016 and 2021, a five-year period that
has seen a ten-point nine percent growth rate annually(Ibis, 2021).
 The industry has outperformed many other sectors in the country; its growth was greater than
that of the overall economy in the United States.
 The industry is expected to grow further in the coming years.

7. Other Variables Outlining the Industry Detail
 Other variables that outline the VC industry include the impacts of the industry on the United
States.
 The industry is known for its tremendous efforts in ensuring that innovation is championed in
the United States, with entrepreneurs full of great ideas being backed to fulfill their visions
(Sathe & Tyabji, 2010).
 To the stakeholders, the industry grants them immense profits from the companies created
and invested in, which is the the main reason many venture capital firms have been
successful and with such great wealth in their accounts (Sathe & Tyabji, 2010).

8. Conclusions
 •The general observation about the venture capital industry is that it is a major driving force
for the success of the United States economy.
 The United States is the creator and leader of venture capital globally; this is indicated by its
great success in the industries above other countries.
 In the coming years, the industry will surely reap much more profits, and venturing into the
sector is a good move for many investors as much as it is hard to create venture capital firms.
 Benefits such as employment opportunities, innovation, and economic development from the
venture capital industry combined with both the governments and venture capitalists

9. References
 Gompers, P., Gornall, W., Kaplan, S. N., & Strebulaev, I. A. (2019, June 11). How do
venture capitalists make decisions.
Retrievedfromwww.sciencedirect.com/science/article/abs/pii/S0304405X19301680:https://w
ww.sciencedirect.com/science/article/abs/pii/S0304405X19301680
 Ibis. (2021, July 27). Venture Capital & Principal Trading in the US - Market Size 2002–
2027.Retrieved from www.ibisworld.com/industry-statistics/market-size/venture-capital-
principal-trading-united-states/: https://www.ibisworld.com/industry-statistics/market-
size/venture-capital-principal-trading-united-states/
 Sathe, V. & Tyabji, H. (2010, 8 N/A). VENTURE CAPITAL FIRMS IN AMERICA: THEIR
CASTE SYSTEM AND OTHER SECRETS. Retrieved
fromiveybusinessjournal.com/publication/venture-capital-firms-in-america-their-caste-
system-and-other-secrets/: https://iveybusinessjournal.com/publication/venture-capital-firms-
in-america-their-caste-system-and-other-secrets/