Types of early phase equity funding
Possible investor types in different start-up stages
How does a VC fund work?
What is the investors role within a VC fund?
The Investors are the VC fund’s source of capital
Aka the limited partners of the fund
Provide the capital for the VC
Typically high net worth inidviduals, banks, pension funds, insurances, corporations
Expect a high return to compensate for the assets high risk
What is the role of the Venture Capital Company?
The VC acts as a financial intermediary and invests the fund’s money into portfolio companies
Usually two legal entities: the management company and the general partner of the VC Fund
Raises funds
Identify and screen opportunities
Transact and close deals
Monitor and add value to investments
Harvest
What is the role of a portfolio company within a VC fund?
The portfolio companies have to use the VC fund’s money to create value
Uses VC money to
Create, recognize and execute an opportunity
Develop products or enter markets
Push and scale into market-leading position
Ultimately try to harvest the created value through an exit
Equity and Monetary stream between investors, venture capital compay and portfolio company
First the VC buys a certain stake of the target company
After a certain holding period the VC tries to sell the company
And most of the proceeds from the sale of the company are ultimately paid back to the VC fund’s investors
Non monetary value created by a VC
Strategic advice
network
Top 9 lies that VCs tell
I really liked your company but my partners didn’t
We like early stage investing
We can open doors for you
This is a vanilla term sheet
If you get a lead we will follow
Show us some traction and we will invest
We love to co-invest with other VCs
We are investing in your team
I have lots of bandwith to dedicate to your company
Last changed8 months ago
