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 !!!