Venture Capital from Capitalists: Empowering Budding Minds & Elevating their Innovative Ideas
“Venture capital is about capturing the value between the startup phase and the public company phase”- Fred Wilson
At the initial stage of establishing a company, a continuous pool of capital is needed for your business to survive in this neck-to-neck competitive and storming industry. During the inception stage of a startup, it is very hard to get a reliable source of funding so that your innovation may not get demolished at budding stage for lack of money. Venture capital has been one of the key sources of financing for the budding entrepreneurs and startups, because at initial point nobody comes ahead for contributing capital. At that point venture capitalists help them to grow to an exponential height.
What is venture capital?
Venture capital (VC) is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential and would fetch them a high Return-On-Investment.
Key points to know about venture capital:
• The professor of Harvard Business School, Sir Georges Doriot is generally considered the ‘Father of Venture Capital’. In India it was introduced in 1998 after the economic liberalization.
• Venture Capital can be provided at different stages of company’s evolution, although it often involves early and seed round funding.
• Venture Capital tends to focus on emerging companies seeking substantial funds for the first time and on the contrary the private equity tends to find out more established and recognized ones. They look for chances for the owners to transfer ownership of the company shares.
• Venture Capitals are a long term of investment, where the return on investment will reflect in coming 5-10 years.
• Venture Capitalists assist the startups through capital financing, technological expertise, and managerial guidance.
• After providing the needful fund for the startups they become a part of the company and have equity of the share. Thus, their decisions and suggestions become valuable.
• Venture Capitalists guide the new business owners about different channels of network for promotion and advertisement which help them to reach to a lot of consumers in a short span of time.
• Venture Capital firms create a pool of investment by collecting money from different investors or business owners.
• Venture Capitalists are the large and well grown institution, like pension funds, financial firms, insurance companies, and university endowments— who put some part of their income into a high-risk investment. That is the reason they provide capital to the young entrepreneurs who have innovative business ideas which will earn them at least 25-35 percent of return on their investment.
There are altogether six types of venture capital.
• Seed Capital: Seed funding is regarded as the parental support for a business, as it helps the entrepreneur to develop ideas, do market research and plans, set-up administrative organization to establish the edifice of an empire. It is given in small amount but it helps to encourage an aspiring mind to get up and run.
• Startup Capital: Business owners search and appeal for startup capital after they have set-up the initial foundation of their business by themselves, family or friends or with seed capital. It is used to manufacture prototypes, hire personnel and upgrade operations.
• Early-stage Capital: This type of funding is given to those business organizations who already have their own product and an organized system of manufacturing unit, but needs to increase their sale and commercial manufacturing through promotion and branding.
• Expansion Capital: This is the fund a startup needs to expand their operations to hit the new market trends, by introducing new products, investing in new technologies, or for acquiring or owning new offices or warehouses or even new company.
• Late-Stage Capital: This is needed to grow bigger and invest more on brand promotion by employing renowned faces to reach to more people and touch the crux of their business.
• Bridge-funding: If your company is planning to introduce IPO, this will help in bridging finance that is for the short-term where you need to pay a cost for going public. This capital helps the company to meet their short-term expenses.
Who are venture capitalists?
Venture capitalists are those strong entities who help the startups at their early stage with money and administrative and management guidance. When the startup companies have a high growth potential and the venture capitalists assume that it can fetch high-return on their investment, they come forward to help those startups. Sequoia Capital, Blume Ventures, Trifecta Capital, Ventureast, Nexus are the stalwart VCs in the Indian industry. The global venture capital investment market size reached $233.9 billion in 2022, which is poised to grow $708.6 billion by 2028, with a CAGR of 20.29 percent during FY2022-2028.
The qualities venture capitalists look in startups before investing:
• Strong Business Plan: A sound business plan, trendy and innovative idea, and a clear roadmap to achieve the target is what venture capitalists look for in a young startup before investing.
• A Clear Idea about the Marketing: Marketing and promotion play the pivotal role in any business. You should possess a good knowledge of the market value and targeted consumers so that your products can hit the market at the right spot. Venture capitalist always questions about the marketing channels and promotional programs to check how the company will grow.
• Renowned Business School Student: Generally, VCs look for students who have passed out from renowned business school because business school plays a far-reaching effect over the intellect, skills, knowledge and expertise of the students. They guide their students with sound business etiquettes and numerous means & ways to run a successful venture.
• Good Demonstrating Power: It is very important to demonstrate your products rightly, and answer all the questions perfectly about the technicalities related to your product. Demonstration plays a significant role in being the choice of a renowned VC. If the VCs see any negative point or they understand that their product doesn’t have high growth potential, then they will take backstep and decline.
• Authenticity: When you are launching a new product, it is very crucial to have authenticity and innovative features in your product. It should not be a mere copy of any product which is already available in the market. VCs always looks forward for the product’s which are authentic and unique.
• A Skilled Finance Team: A startup should have a team of experts for financial planning and analysis, accounting and financial reporting, treasury and cash management, tax and compliance, internal audit, financial operations, risk management, and investor relations. VCs always look for a startup with skillful team of expert and intelligent finance personnel who have a stronghold over the market, target customers and sales.
Last Note: Truly, VCs lie at the pinnacle point for startups as they help the young budding minds to climb a few steps in the ladder of success, but it is always good to remember that you should identify and know whether your company has all the qualities or not to be the perfect choice of venture capitalists. It is not about being one of the competitors in this vast market but being the best.
At the initial stage of establishing a company, a continuous pool of capital is needed for your business to survive in this neck-to-neck competitive and storming industry. During the inception stage of a startup, it is very hard to get a reliable source of funding so that your innovation may not get demolished at budding stage for lack of money. Venture capital has been one of the key sources of financing for the budding entrepreneurs and startups, because at initial point nobody comes ahead for contributing capital. At that point venture capitalists help them to grow to an exponential height.
What is venture capital?
Venture capital (VC) is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential and would fetch them a high Return-On-Investment.
Key points to know about venture capital:
• The professor of Harvard Business School, Sir Georges Doriot is generally considered the ‘Father of Venture Capital’. In India it was introduced in 1998 after the economic liberalization.
• Venture Capital can be provided at different stages of company’s evolution, although it often involves early and seed round funding.
• Venture Capital tends to focus on emerging companies seeking substantial funds for the first time and on the contrary the private equity tends to find out more established and recognized ones. They look for chances for the owners to transfer ownership of the company shares.
• Venture Capitals are a long term of investment, where the return on investment will reflect in coming 5-10 years.
• Venture Capitalists assist the startups through capital financing, technological expertise, and managerial guidance.
• After providing the needful fund for the startups they become a part of the company and have equity of the share. Thus, their decisions and suggestions become valuable.
• Venture Capitalists guide the new business owners about different channels of network for promotion and advertisement which help them to reach to a lot of consumers in a short span of time.
• Venture Capital firms create a pool of investment by collecting money from different investors or business owners.
• Venture Capitalists are the large and well grown institution, like pension funds, financial firms, insurance companies, and university endowments— who put some part of their income into a high-risk investment. That is the reason they provide capital to the young entrepreneurs who have innovative business ideas which will earn them at least 25-35 percent of return on their investment.
Types of Venture CapitalSuccess needs time and effort along with strong & out-of-the-box ideas to grow backed by a deep knowledge
There are altogether six types of venture capital.
• Seed Capital: Seed funding is regarded as the parental support for a business, as it helps the entrepreneur to develop ideas, do market research and plans, set-up administrative organization to establish the edifice of an empire. It is given in small amount but it helps to encourage an aspiring mind to get up and run.
• Startup Capital: Business owners search and appeal for startup capital after they have set-up the initial foundation of their business by themselves, family or friends or with seed capital. It is used to manufacture prototypes, hire personnel and upgrade operations.
• Early-stage Capital: This type of funding is given to those business organizations who already have their own product and an organized system of manufacturing unit, but needs to increase their sale and commercial manufacturing through promotion and branding.
• Expansion Capital: This is the fund a startup needs to expand their operations to hit the new market trends, by introducing new products, investing in new technologies, or for acquiring or owning new offices or warehouses or even new company.
• Late-Stage Capital: This is needed to grow bigger and invest more on brand promotion by employing renowned faces to reach to more people and touch the crux of their business.
• Bridge-funding: If your company is planning to introduce IPO, this will help in bridging finance that is for the short-term where you need to pay a cost for going public. This capital helps the company to meet their short-term expenses.
Who are venture capitalists?
Venture capitalists are those strong entities who help the startups at their early stage with money and administrative and management guidance. When the startup companies have a high growth potential and the venture capitalists assume that it can fetch high-return on their investment, they come forward to help those startups. Sequoia Capital, Blume Ventures, Trifecta Capital, Ventureast, Nexus are the stalwart VCs in the Indian industry. The global venture capital investment market size reached $233.9 billion in 2022, which is poised to grow $708.6 billion by 2028, with a CAGR of 20.29 percent during FY2022-2028.
The qualities venture capitalists look in startups before investing:
• Strong Business Plan: A sound business plan, trendy and innovative idea, and a clear roadmap to achieve the target is what venture capitalists look for in a young startup before investing.
• A Clear Idea about the Marketing: Marketing and promotion play the pivotal role in any business. You should possess a good knowledge of the market value and targeted consumers so that your products can hit the market at the right spot. Venture capitalist always questions about the marketing channels and promotional programs to check how the company will grow.
• Renowned Business School Student: Generally, VCs look for students who have passed out from renowned business school because business school plays a far-reaching effect over the intellect, skills, knowledge and expertise of the students. They guide their students with sound business etiquettes and numerous means & ways to run a successful venture.
• Good Demonstrating Power: It is very important to demonstrate your products rightly, and answer all the questions perfectly about the technicalities related to your product. Demonstration plays a significant role in being the choice of a renowned VC. If the VCs see any negative point or they understand that their product doesn’t have high growth potential, then they will take backstep and decline.
• Authenticity: When you are launching a new product, it is very crucial to have authenticity and innovative features in your product. It should not be a mere copy of any product which is already available in the market. VCs always looks forward for the product’s which are authentic and unique.
• A Skilled Finance Team: A startup should have a team of experts for financial planning and analysis, accounting and financial reporting, treasury and cash management, tax and compliance, internal audit, financial operations, risk management, and investor relations. VCs always look for a startup with skillful team of expert and intelligent finance personnel who have a stronghold over the market, target customers and sales.
Last Note: Truly, VCs lie at the pinnacle point for startups as they help the young budding minds to climb a few steps in the ladder of success, but it is always good to remember that you should identify and know whether your company has all the qualities or not to be the perfect choice of venture capitalists. It is not about being one of the competitors in this vast market but being the best.
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