An entity, usually a limited partnership or limited liability company that invests in startups with potential for a high return on investment (or of course, the startup could fail and they could lose it all).
Venture capital comes from rich people, investment banks and the like. Sometimes, venture capital can be provided in the form of technical or managerial expertise instead of money.
Though it can be risky, the potential for huge returns is there too. The startup could blow up (hopefully not literally) and the investor could make it big. For startups, venture capital funding is a main source for raising capital. The downside for the startups is that venture capital investors usually get equity in the company, so they’ll have a say in your company’s decisions. If they’re a jerk, that could suck later on.
One important difference between venture capital and other private equity deals is that venture capital tends to focus on startups seeking a large amount of funds for the first time never AKA noobs. Private equity tends to fund larger, more established companies, AKA old fogies.
The rich people behind venture capital are sometimes known as angel investors. You’d think you’d be able to spot an angel investor anywhere, but they are a diverse group. Your next angel investor could be almost anyone! However if we want to try to pin them down, they are often entrepreneurs themselves or retired execs looking for a new thrill.
Self-made investors look to invest in companies that they see as well-managed with a good business plan and founded in an idea that could lead to substantial growth. They like to invest in the same industries that they know and love.
When looking for venture capital, the first thing you want to do is submit a business plan to them. If they’re interested, they will look into your business model, products, management and operating history in detail.
Venture capital investors put a lot of money into not a lot of companies, so capturing their interest is key.
We’re holding out for a hero til the morning light – and he’s gotta be rich and he’s gotta be strong and he’s gotta be an angel investor!