What is a Venture Capitalist?

A venture capitalist (VC) is an investor who provides private financing to a company in exchange for an equity stake (typically 15% to 45% of the company). VCs normally invest in startups or small companies that are seeking to expand, though some venture capitalists invest in more mature companies.

What other tasks do venture capitalists do?

Venture capitalists also act as analysts and fund managers, investing money into a range of businesses. They often specialize in specific industries. Startups in the tech sector are a particular common area of specialization.

A venture capitalist often mentors a company too, providing help with long-term strategy, financial decisions, and daily operations. They may also provide media exposure and increased publicity.

Venture capitalists invest in companies that they believe will achieve exponential growth within 4-6 years. This can lead to a lot of pressure to rapidly ramp up sales and profits.

Do venture capitalists work alone?

Most venture capitalists work within a firm, seeking out investment opportunities for their clients or partners who provide the cash for investment. In some cases, they may invest pension funds or money from foundations.

What’s the difference between a venture capitalist and an angel investor?

Venture capitalists work as part of a company, whereas angel investors are typically individuals working alone.

They are more likely to invest much more money in a company. On average, venture capitalists invest $7M in a company, whereas angel investors typically invest between $25,000 and $100,000.

How common is venture capital funding?

Fewer than 1% of companies have received venture capital funding. In general, companies seek out venture capital funding by taking part in a business accelerator or incubator, by having a meeting with a VC firm, or through an official pitch event.

Before investing, venture capitalists typically want to see a comprehensive business plan. They’ll do considerable due diligence in ensuring that the assumptions and statements in the plan are correct.

Some companies, particularly in the tech industry, will go through several rounds of venture capital funding.

Venture capitalists are investors who seek out investment opportunities in up-and-coming businesses in exchange for a stake of ownership in the company. VCs aim to make a significant return on their investments by betting on innovative companies that show tremendous growth potential.