A venture capitalist is a person or firm that provides new businesses with management assistance and investment capital to get things running smoothly. As compensation, the individual or company providing the funds gets a stake in the new business and its earnings. The size of this equity position is typically determined as being proportional to the amount invested and the risk involved with it.
Essentially, venture capitalists use their investment to buy stakes and positions within new companies. This means that while the company accepting the investment is not required to repay the investment capital, the venture capitalist expects capital gains in return
Venture capital investments are an infusion of equity and expertise into startups and small businesses that have big growth potential.
Private equity investments fund companies through debt, equity, or a combination of the two. Companies of all sizes may be bought with private equity. In some cases, private equity funding takes a publicly traded company "private" and delists it from a stock exchange.
The ultimate goal of venture capitalists is to create value through investing in early-stage or start-up companies with strong high-growth potential and with an innovative, disruptive business model or product. Ultimately, venture capitalists look for bright ideas and even brighter entrepreneurs, with the desire and motivation to see their idea through to success.
Some of them do, the industry term them as incubators and accelerators, then there are few VC’s who have move ahead from this nomenclature and have created an eco-system to mentor and provide necessary resources for the start-up thereby enhancing the chances of success.
When your business is ready for venture capital, create a targeted list of venture capital firms you want to work with. Firms focus on a variety of industries, so make sure to select a firm that specializes in your particular industry. Compare the firm's investment criteria to see if it matches the stage your company is in.
As you narrow down your choices, review prior deals on the venture capital firm's website. Venture capital firms are transparent about their ideal investment opportunities. Pay close attention so you don't waste their time or yours when applying for funding. Some venture capital firms specialize in certain geographies. If you're located in Vancouver, but all of their prior deals are in Toronto, you may not be a good fit. Once you've narrowed down your list of potential venture capitalists, it is time to make a connection. Explore your network to seek out a warm introduction. Industry conferences, trade shows, your customers and suppliers, and LinkedIn are great channels to explore potential venture capital partners.
If that fails, send a personalized email through the firm's website. Remember that venture capitalists receive many inquiries every day, so be clear and concise in discussing your opportunity.