Venture capital is funding offered to startups and small businesses by wealthy investors or financial institutions based on the potential for future growth and innovative ideas. This high-risk investment allows venture capitalists to acquire equity and actively participate in business decision-making, while seeking substantial returns despite a high rate of failure. The process involves multiple stages including idea generation, business planning, preliminary meetings, term sheet agreements, and final funding.

1. Venture Capital

2. INTRODUCTION
• Venture Capital is a form of financing provided to startups or small
businesses at their initial stages by affluent investors (angel
investors), financial entities and investment banks
• This investment by venture capitalist is provided on the basis of
firm’s future prospects, growth potential, innovative ideas and a
well defined framework of business planning & execution

3. FEATURES
• This financing provided by venture capitalists involves high level of risk as the
firms are startups and new in market so the related competition is high to
breakthrough and build a position
• As it involves high risk the expectation of return on financing is also high
• Venture capital is in the form of equity financing where, the investor buys stake
or share in the ownership of the company which enables it to share the risk and
reward of the business

4. FEATURES
• The venture capitalist provides support by guiding and participating actively
in the decision making for business and hopes for the success of firm to reap
out the benefit of a risky-investing
• Involves long-term horizon as the time involved is uncertain which the start-
up may take to build up a profitable business
• Rate of failures and loss of venture capital is quite high still the expected
profit after success of firm makes it lucrative option of investing
• Some of the examples of successful start-ups which were highly valued by
VCs are :- Uber, Flipkart, Xiaomi, Airbnb

5. PROCESS
• Idea Generation (growth potential, innovation)
• Business Plan (business proposal with detailed projections on future plans, financial
framework, competitors analysis, market survey, opportunities & related strategy)
• Preliminary Meeting (meeting to discuss various aspects after going through the set
plans of business proposal and to decide whether to provide financing or not)
• Term sheets Agreement (agreement to move forward with the related term & conditions
of financing)
• Funding (final stage to provide fund)

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