What do venture capitalists do?

A venture capitalist (VC) is a private equity investor that provides capital to companies exhibiting high growth potential in exchange for an equity stake. This could be funding startup ventures or supporting small companies that wish to expand but do not have access to equities markets.

How do venture capitalist make money?

“Venture capitalists make money in 2 ways: carried interest on their fund’s return and a fee for managing a fund’s capital. Investors invest in your company believing (hoping) that the liquidity event will be large enough to return a significant portion: all of or in excess of their original investment fund.

What does venture capital fund mean?

Venture capital funds are pooled investment funds that manage the money of investors who seek private equity stakes in startups and small- to medium-sized enterprises with strong growth potential. These investments are generally characterized as very high-risk/high-return opportunities.

How do you become a venture capitalist?

One path is long, calculated and requires endurance. The first step is to become an associate at a venture capital fund (this typically requires a college degree and a few years working in investment banking or in the greater finance industry). Next, you spend several years learning the ins and outs of the trade.

Why is venture capital so expensive?

Venture capital is the most expensive money you can find to fund your business. One reason it’s so expensive is because of the risks involved (more on that in the next item in this list). Another reason is that making a venture capital investment takes a lot of work. VCs look for healthy companies.

What are the advantages and disadvantages of venture capital?

The Pros and Cons of Venture Funding

• Pro: The money is yours to keep.
• Con: Your investors own a stake in your company.
• Pro: Venture capital can help your company grow quickly.
• Con: Your company may not be ready to grow.
• Pro: VCs can connect you to other business leaders who can help you.