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 !!!