Venture Capital - Launchopedia

Venture Capital is a type of private equity capital in which concept, seed, early, growth (Series A), and mezzanine funding are provided to ventures to support their growth, development, and expansion, in exchange for equity. Earlier round financing is less common and convertible debt is utilized; however, preferred equity is the typical form of investment in the later Series A rounds, which are much more common to the VC. VCs want to generate a return through 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 professionally managed funds, then invest the funds in return for an annual management fee and carried interest on the profits of the fund.

Background Information

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 and invest primarily in highly risky but scalable seed, early and growth stage ventures. These funds are professionally managed by venture capital firms. The firms may employ managerial and technical experts with business and industry experience.

FundingSage’s Listing of VC Funds:

Several of these VC Funds are spotlighted on our FundingSage Startup Investor Spotlight. Learn more about potential VC investors there!

.406 Ventures

180 Degree Capital Group

3i US Growth Capital

5AM Ventures

Accel

Accomplice VC

Accuitive Medical Ventures

Actua Corporation

Adams Capital Management

Advanced Technology Ventures

Advantage Capital Partners

Alta Partners

Andreesen Horowitz

Angel Street Capital

ARCH Venture Partners

Astellas Venture Mangaement

Atlas Ventures

August Capital

Aurora Funds

Austin Ventures

Avalon Ventures

Azure Capital Partners

Bain Capital Ventures

Backstage Capital

Battery Ventures

Ben Franklin Technology Partners

Benchmark Capital

Beringea LLC

Bessemer Venture Partners

BioVentures Investors

Canaan Partners

Canvas Venture Fund

Cardinal Venture Capital

Carlyle Group

Centennial Ventures

Charles River Ventures

Chrysalis Ventures

Clarus Ventures

Columbia Capital

Columbus Nova Technology Partners

Connecticut Innovations

Crosslink Capital

DAG Ventures

Data Collective

Domain Associates

Draper Fisher Jurvetson

Elevation Partners

Essex Woodlands

Floodgate

Flybridge Capital Partners

Flywheel Ventures

F-Prime Capital Partners

Focus Ventures

Foundation Capital

Founders Fund

Fortress Capital Finance

Frazier Healthcare

GE Ventures

General Catalyst Partners

GGV Capital

Globespan Capital Partners

Granite Ventures

Greylock Partners

Hercules Technology Growth Capital, Inc

Highland Capital Partners

Illinois Ventures

Index Venture Management Inc.

Insight Ventures Partners

Institutional Venture Partners

Intellectual Ventures

JMI Equity

Khosla Ventures

Kleiner, Perkins, Caufield, Byer

Labrador Ventures

Lightspeed Venture Partners

Lux Capital

Maryland Technology Development Corporation

Matrix Partners

Maveron

Mayfield Fund

Menlo Ventures

Meritech Capital Partners

Mohr Davidow Ventures

New Enterprise Associates

Northbridge Venture Partners

Norwest Ventures Partners

Oak Investment Partners

OpenView Venture Partners

OriMed

Partners Innovation Fund

Point Judith Capital

Polaris Venture Partners

Radius Ventures

Redpoint Ventures

Rocket Ventures

RRE Ventures

Sapphire Ventures

Scale Venture Partners

Sequoia Capital

Sevin Rosen Funds

Sigma Partners Boston

Silver Lake

Slow Ventures

Sofinnova Ventures

Spark Capital

StarVest Partners, L.P.

Struck Capital

Sutter Hill Ventures

SV Angel

SV Life Sciences

Technology Crossover Ventures

Tenaya Capital

The D. E. Shaw Grou

Trident Capital

Uncork Capital

Union Square Ventures

Unusual Ventures

VantagePoint Venture Partners

Venrock

Venvelo

Versant Ventures

Watson Fund

Wave Capital

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’s 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.

Worldwide Venture Capital Trade Associations

African Venture Capital Association

Australian Private Equity & Venture Capital Association LTD

Austrian Private Equity and Venture Capital Organization

Belgium Venture Capital Association

Brazilian Private Equity and Venture Capital Association

British Venture Capital Association

Canadian Venture Capital & Private Equity Association

Croation Private Equity and Venture Capital Association

Danish Venture Capital and Private Equity Association

Digital Venture Capital Association

Estonian Private Equity and Venture Capital Association

European Venture Capital Association

Finnish Venture Capital Association

France Invest

Greek Venture Capital Association

Hungarian Venture Capital Association

Hong Kong Venture Capital and Private Equity Association

Indian Private Equity & Venture Capital Association

Invest Europe

Irish Venture Capital Association

Italian Private Equity and Venture Capital Association

Latin American Venture Capital Association

Latvian Private Equity and Venture Capital Association

Luxembourg Private Equity & Venture Capital Association

Malaysian Venture Capital Association

National Venture Capital Association

Netherlands Venture Capital Association

New Zealand Venture Capital Association

Norwegian Venture Capital and Private Equity Association

Philippine Venture Capital Association

Polish Private Equity and Venture Capital Association

Russian Private Equity and Venture Capital Association

Singapore Venture Capital and Private Equity Association

Slovac Venture Capital and Private Equity Association

Southern African Venture Capital and Private Equity Association

Spanish Venture Capital Association

Swedish Venture Capital Association

Swiss Private Equity and Corporate Finance Association

Taiwan Venture Capital Association

Turkish Private Equity and Venture Capital Association

Ukrainian Venture Capital and Private Equity Association

Other Resources

Definitioner

Venture Capital / Venture Capitalist

Limited Partner

LLC

Limited Liability Company

Net Worth

The value of total assets minus total liabilities.⁶

Entrepreneur

A person who organizes and operates a business or businesses, taking on greater than normal financial risks to do so. Entrepreneurs are the founders of startups and are the people angel investors support.⁷

Venture Capital Firm

Venture Capital Firm is an investment company that invests its shareholders' money in startups and other risky but potentially very profitable ventures.⁵

Venture Capitalist

A group of high net worth investors who pool their money to invest in later stage startup companies.⁶

Venture Capital

Investment capital made available to high growth, scalable startups, typically beginning at the early stage, from a fund supported by accredited investors.⁶

Venture

Venture is often used for referring to a risky start-up or enterprise company.⁵

Startup

A startup is a new business venture / enterprise in its initial or early stages of development. These stages include the concept, seed, early, growth and mezzanine stages.⁶

Equity

Ownership in the capital of a Company. In corporations, it is called “stock”; in limited partnerships or LLCs, it is called “interests” or “units.”³
This designation is given to a stockholder’s ownership in a company. The amount of ownership is obtained when an individual or corporation purchases one or more shares of stock (equity shares). The more equity purchased, the greater the ownership.⁴

Management Fee

Compensation typically paid annually from an investment fund to the general partner or investment advisor of the fund to cover administration costs, expenses related to investor relations and to compensate them for their services and expertise.⁶

Liquidation

When a business is bankrupt or terminated, its assets are sold and the proceeds pay creditors. Anything left over is distributed to shareholders.²
1) The process of converting securities into cash. 2) The sale of the assets of a company to one or more acquirers in order to pay off debts. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock.³
This is an event that represents the complete or partial closing of a company. In a liquidation event, a company’s assets and material goods (securities) are converted into cash and/or distributed for sale to pay off existing corporate debt.⁴
Liquidation is the sale of the assets of a portfolio company to one or more acquirers when venture capital investors receive some of the proceeds of the sale.⁵

LP (Limited Partner)

(LP) An investor in a limited partnership who has no voice in the management of the partnership. LPs have limited liability and usually have priority over GPs upon liquidation of the partnership.³

IPO

Initial Public Offering.

IPO (Initial Public Offering)

(IPO) The sale or distribution of a stock of a portfolio company to the public for the first time. IPOs are often an opportunity for the existing investors (often venture capitalists) to receive significant returns on their original investment. During periods of market downturns or corrections, the opposite is true.³
(IPO)This is a private corporation’s first-time sale or allocation of a stock that is made available to the public. IPOs can be distributed to both young and established companies who seek to expand or warrant public trading.⁴

Corporation

A legal entity structure for businesses enterprises which are typically chartered by a state or the federal government, under which ownership is held by shareholders.⁶

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Carried Interest

or “Carry³” The portion of any gains realized by the fund to which the fund managers are entitled, generally without having to contribute capital to the fund. Carried interest payments are customary in the venture capital industry, in order to create a significant economic incentive for venture capital fund managers to achieve capital gains.³

Related Terms Accrued Interest | Capital | Limited Partnership Related Articles

Three Things a Bank Wants to Know Before Giving You A Loan

Venture Capital – VC Investment

Capital

Financial capital is a term that can refer to the money exchanged between entrepreneurs and investors during a business deal. Entrepreneurs need to raise capital for their startups while investors can provide them with the needed capital (or funding). Financial capital usually comes with interest, and new business owners can use their financial capital in purchasing real capital (or machinery or equipment) for their new business.⁴

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INFOGRAPHICS

Background Information

Worldwide Venture Capital Trade Associations

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