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Frequently Asked Questions
What is the Venture Capital Ecosystem?
A Venture Capital ecosystem serves the purpose of bridging the financial gap for companies, especially Start-ups and SMEs. The main pillars of a VC ecosystem can be considered to be:
Professional investors who are interested in and understand the asset class;
Venture capital fund managers with the necessary business acumen and commitment to the effort and
Businesses who are interested in and ready to receive VC investments.
What’s the difference between venture capital and private equity?
Venture capital is a subset of the larger private equity asset class. The private equity asset class includes venture capital, buyouts, and mezzanine investment activity. Venture capital focuses on investing in private, young, fast growing companies. Buy-out and mezzanine investing focus on investing in more mature companies. Venture capitalists also invest cash for equity. Unlike buy-out professionals, venture capitalists do not use leverage in their transactions.
What kind of investors are venture capitalists?
Venture capitalists are professional investors who specialize in funding and building young, innovative enterprises. Platform venture capitalists are long-term investors who take a hands-on approach with all of their investments and actively work with entrepreneurial management teams in order to build great companies.
In what ways does a venture capitalist benefit the business?
From a purely financial standpoint, a platform venture capitalist brings much needed funds into the company without any regular repayment required. The individual should not be considered some kind of lender, as he or she shares your hope for the company’s success. This means the company gets access to his or her network, experience and sense of discipline. This is not to mention the fact that the presence of a venture capitalist in your company gives it added credibility in the larger industry.
What is a Venture Capital Fund?
An investment fund that manages money from investors seeking private equity stakes in startup and small- and medium-size enterprises with strong growth potential. These investments are generally characterized as high-risk/high-return opportunities.
Why do small businesses seek financing?
Small businesses borrow for four principal reasons: to start a business, purchase inventory, expand a business, and strengthen the firm’s financial foundation. Firms choose different means of financing depending on the intended purpose. Small businesses’ financing options typically fall into two categories: debt and equity. Other unconventional sources can also play a critical role in meeting a firm’s financial needs.
What is an ‘angel’ investors?
An “angel” is a high net worth individual who invests directly into promising entrepreneurial businesses in return for stock in the companies. Many are entrepreneurs themselves, as well as corporate leaders and business professionals.
What are the 7 Trends in Blockchain Computing?
- Improving developer productivity
- Scaling out versus scaling up
- On-chain governance
- Proof of Stake Networks, and especially their resilience to attacks
- 2017: year of of fund raising, 2019: year of launches
- Autonomous and re-mixable code
- Killer apps: distributed finance and beyond
What kind of position does the venture capitalist take?
Once the investment has been made, the venture capitalist should be viewed as a partner. In terms of the aforementioned management position, this may come in the form of a seat on the company’s board of directors or via contributions to management decisions. It is the goal of the venture capitalist to see a return of 30 to 40 percent on the initial investment every year in which the entity is directly involved, which is usually a period of four to seven years. For the company, this means that an aggressive plan for growth must be implemented to meet this expectation.
Angels invest their own money, VCs invest their LP’s?
Venture capital firms have limited partners. These limited partners come in all shapes and sizes from all over the world. And in turn these limited partners are frequently entities that are funnels for other sources of money.
Traditionally, angel investors were individuals that would use their own personal capital to make an investment. Recently, “seed stage” venture firms have emerged that have between one to three partners. These seed stage firms are usually backed by institutional limited partners or even by venture firms. They are really small venture firms that present more like angels because there are usually one or two partners running the seed stage firm.