Venture capital funding is difficult to obtain as venture capitalists have a high rejection rate, only funding one out of every 1000 ventures considered. They value companies by multiplying the current revenue by 20 and taking 20-40% equity in the company in exchange for releasing funds in small amounts over time. If the company is successful, additional venture capitalists may join later funding rounds and the original investors will eventually exit by selling their shares back to the company or taking the company public.

1. How does Venture Capital
Funding or VC Funding Works
By Anurag Kartik

2. VC Funding is Tough
 To get VC Funding is tough because
venture capitalists are thorough
professionals who understand about
success of venture.

3. High Rejection Rate
 Out of 1000 ventures that go to
venture capitalists for consideration,
only five are considered, rest are
rejected.
 Out of these five only one is funded.

4. Valuation
 The current revenue of company is
multiplied by 20 times, and value of
company is calculated
 They put x amount of money in
company based upon valuation and
take 20-40% share in company.

5. Small Amounts Released
 The venture capitalists release small
sums of money for the operation of
company.
 At regular interval they take their
share of profits.

6. Other VCs Join
 If company keeps on making money
then based on new valuation of
company other VCs join in B and C
round of funding.

7. Exit of VCs
 The VCs exit by taking their total
share, or by selling back the share of
company to the Directors.
 If company goes for IPO then they
take their respective shares.

8. Thank you!
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