What is Venture Capital?
This post is part of the collection “Samaipata Basics”: a first introduction to the world of venture capital and startups
Venture Capital, commonly referred to as VC, is a form of private equity in which private investors (be it firms, funds or individuals) provide capital to, typically, early stage enterprises with high growth potential (≈startups).
In exchange for the invested capital, the startup offers the investor an equity stake in the venture; thusly making him a shareholder. The percentage offered is dependent on the amount invested and the startup’s valuation.
The vast majority of VC deals involve startups that have either managed to obtain innovative technology or are disruptive in the way they conduct business; either way, the venture has a clear unique selling point (USP) that can be major driver to their success provided that they are given the financial means to realise their potential.
Over the last decade, venture capitalism has gained significant popularity; according to Ernst & Young global VC investments in 2015 was just a tad shy of 150 billion USD across roughly 8,400 deals.
Check out the video below by Forbes on the basics of Venture Capital: