the basics of venture capital funding
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Venture Capital Funding
Robert Smith
Contents
• Introduction• Features of Venture Capital• Advantages of Venture Capital• Disadvantages of Venture Capital• Stages of Financing• VC Investment Process• Venture Capital in the USA• Conclusion
Introduction
• Venture capital is the financial capital provided by investors to early stage, high potential and startup companies.
• Venture capital firms get money by owing equity in the company.
Features of Venture Capital
• High Risk• Lack of Liquidity• Long Time Horizon• Provided at Early Stage• High-tech• Participation in Management• Equity Participation
Advantages of Venture Capital
• It provides large sum of equity finance.
• It brings wealth and expertise to your
company.
• VC funding is not a loan scheme, so there
is no repay schedule.
• Easier to secure future funding through
venture capital funding.
Disadvantages of Venture Capital
• Lengthy and Complex process. They need detailed business plan and financial projections.
• You have to add a member of VC firms in your company’s management team. This can create internal problem in the company.
• At deal stage you have to pay for legal and accounting fees.
Stages of FinancingFinancial Stage Periods (Funds
Locked in Years)
Risk Perception Activity
Seeding Capital 7-10 Extreme R&D for Product Development
Start Up Capital 5-9 Very High Developing Prototypes
Early Stage Capital 3-7 High Start Commercials Production and Marketing
Expansion Capital 3-5 Sufficiently High Expand market and working capital need
Late Stage Capital 1-3 Medium Market expansion and Acquisition
VC Investment Process
Deal Origination Screening Evaluation
Deal StructurePost Investment ActivityExit Plan
Venture Capital in the USA• It is hard to create VC firms.
• For two-third of VC firms, the first fund is their last fund.
• Only 10 % of VC firms launch more than four funds.
• Difficult for VC firms to become a two-tier.
• Venture capitalists invested some $29.1 billion in the U.S. through the fourth quarter of 2011.
Conclusion• The venture capital firm is an uncommon
institution. It rises on reputation and skills of its person.
• VC firms can assist small companies to upgrade their technology.
• Continued success is needed to become top-tier firm.
Reference Links• http://www.mytopbusinessideas.com/advan
tages-venture-capital/• http://en.wikipedia.org/wiki/Venture_capital• http://iveybusinessjournal.com/publication/
venture-capital-firms-in-america-their-caste-system-and-other-secrets/
• http://bit.ly/18xGcx1
Thank You !!!
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