What is VC Funding?
A Venture capital (also known as VC or Venture) is a type of private equity capital typically provided to immature, high-potential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. Venture capital investments are generally made as cash in exchange for shares in the invested company. Venture capital typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms.
Venture capital (VC) funding is money invested in companies without a proven record of success, usually start-up companies. Normally VC funding comes in when a person with an idea for a product first invests most of his or her money in the idea. A second level of funding may be given by what is called an “angel investor,” who may help the person more fully realize their idea or product. In order to achieve VC funding, preliminary results on the product or concept must look as though they will prove profitable. Most start-up companies receive VC funding by making business proposals that show a firm chance of the investor advancing VC funding making a considerable profit. Usually the VC funding individual or company expects or hopes to make at least a 20% return on their funds, though this has proven not the case in many incidences. VC funding used to be called risk capital funding, with good reason. The negativity of associating “risk” with one’s capital produced the gradual name change
IS IT JUST THE STORY OF THE MAN WITH THE IDEA AND THE MAN WITH THE MONEY? Slide 3: VC FUNDING IS NOT JUST ABOUT … FIRST GENERATION ENTREPRENEURS … TECHNOCRATS … HIGH TECHNOLOGY … FIRST TIME TECHNOLOGIES Slide 4: WHAT VC FUNDING IS … IT IS THE BUSINESS OF EMPLOYING CAPITAL ‘PATIENTLY’ TO ‘MAXIMISE RETURNS’ WHILE MANAGING RISKS IN A RELATIVELY HIGH-RISK VENTURE VERSUS SIMPLY ‘MINIMISING RISKS’ FOR A SURER FIXED RETURN Slide 5: VC FUNDING IS … DIFFERENT FROM OTHER TYPES OF FUNDING IN THE: – SELECTION OF INVESTMENT – STRUCTURING OF INVESTMENT – ACTIVITY FOLLOWING INVESTMENT – EXITING FROM INVESTMENT Slide 6:- Equity Participation. – Long-term Investments. – Participation in Management. – Venture capitalist combines the qualities of bankers stock market investors entrepreneur Features of Venture Capital Preferred Products for VCs :Preferred Products for VCs Revolutionary Very Hard to Finance – Huge Capital Requirements & Long Development Cycles for eg. TV, Camera, Computer, Light Bulb, Gene