Venture Capital is a type of private equity capital in which seed, early stage, growth, (Series A) and mezzanine, (Expansion) funding is provided to ventures to support their growth, development and expansion, in exchange for equity. While earlier round financing is less common and convertible debt may also be utilized, preferred equity which provides certain investor’s rights is the typical investment instrument in the later, Series A rounds, which are much more common to the VC. The objective of the VC is to generate a return through the realization of a future liquidation event, such as a sale to a strategic player or an IPO. Venture capital firms source their funds for investment from high net worth individuals through funds which are professionally managed, and invest the funds on behalf of these individuals in return for an annual management fee and carried interest on the profits of the fund.
An individual who provides financial capital for venture investment as well as managerial and / or technical expertise is generally referred to as a venture capitalist. These resources are usually invested through a “pooled investment vehicle”, such as an LLC or LP, (Fund), and invest primarily in highly risky but scalable seed, early and growth stage ventures which have difficulty obtaining funds from the capital markets or banks. These funds are typically professionally managed by venture capital firms which may also employ managerial and technical experts with deep business and industry experience.
There are two primary types of venture capital providers. The first is the venture capital firm which is generally recognized by the public for providing financial capital or resources focused primarily for the objective of a financial return for its investors. Corporate venture capital is funds from existing corporations which invest their monies and expertise directly into startups external to the corporation, for both strategic and financial purposes. Corporate venture capital is a significant subset of the venture capital industry.
The objectives of venture capital firms vary significantly as do their approaches. As noted above some may invest with financial goals in mind while others invest for strategic purposes. A recent phenom is the creation of firms with a societal focus. Venture capital firms may focus on startup companies in different stages of development or from different industries. Some may operate locally only while others operate regionally, nationally or globally. Some may invest only in disruptive concepts while others invest in existing established companies which simply need support to grow. They invest in differing business models with differing growth curves, trajectories and capital intensity. It is therefore very important that the entrepreneur fully understand the objectives and approach of the venture capital firm in order to utilize their time and resources as efficiently as possible.
African Venture Capital Association: African Venture Capital Association, (AVCANET) is an industry body which operates across Africa to promote and enable private equity on the continent.
Australian Private Equity & Venture Capital Association LTD: Australian Private Equity & Venture Capital Association LTD, (AVCAL) is an Australian association representing the private equity and venture capital industries in the country.
Canadian Venture Capital & Private Equity Association: Canadian Venture Capital & Private Equity Association, (CVCA) promotes the venture capital and private equity industries in Canada.
Digital Venture Capital Association: Digital Venture Capital Association, (DigitalVCA) is a non-profit which represents the venture capital and private equity industries globally with the objective of growing the digital and high growth technology sectors for the benefit of society.
European Venture Capital Association: European Venture Capital Association, (EVCA) seeks to shape the future direction of the European private equity and venture capital industries while promoting it to its stakeholders.
Hong Kong Venture Capital and Private Equity Association: Hong Kong Venture Capital and Private Equity Association, (HKVCA) was established in 1987 to promote and protect the interests of the venture capital industry in Hong Kong.
Indian Private Equity & Venture Capital Association: Indian Private Equity & Venture Capital Association, (IVCA) established in 1993 seeks to promote the development of the venture capital and private equity industry and to support entrepreneurial activity and innovation in India.
Latin American Venture Capital Association: Latin American Venture Capital Association, (LAVCA) is a non-profit association which is supports the growth of the private equity and venture capital industries in Latin America.
National Venture Capital Association, (NVCA): National Venture Capital Association, (NVCA) advocates for the US venture capital community encouraging policies that encourage innovation and reward long term investment.
New Zealand Venture Capital Association, (NZVCA): New Zealand Venture Capital Association, (NZVCA) has, as its mission to ”develop a world-best venture capital and private equity environment for the benefit of investors and entrepreneurs in New Zealand.
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