Venture capital is finance that is provided by investors to start-ups, early-stage and small companies that have the potential to reshape markets and grow very fast. The money deployed by a Venture Capital firm usually comes from well-off investors, investment banks, institutional investors, corporations or wealthy individuals looking to do some serious dough.
Let’s say Mr. A & B have a learning app that’s getting a lot of customers (learners) and media attention. They know their little company could be a successful venture one day but the banks are hesitant to lend them money because they think it’s too risky, but Mr. X, a successful Venture Capital looks at what Mr. A & B have done and thinks the benefits outweigh the risks. He gets to know the two, learns about their product, reads the business plan and finds out how much they have done so far. Mr. X likes what he sees and decides to invest in Mr. A & B’s company. He does the same in varying amounts to other startups with similar potential.
Venture Capitalist in India
Venture capitalists in India are an important or vital part of the startup ecosystem. Once a startup has reached its growth stage, the most important requirement is to get support from the reliable investors and a sufficient amount of funding to scale up their venture. The major venture capitalist in India are as follows:
- India Quotient
- Intel Capital
- Helion Venture Partners
- Accel Partners
- Blume Ventures
- Sequoia Capital India
- Nexus Venture Partner
- Qualcomm Venture
- Zodius Capital
All the above-mentioned capitalists and there are so many venture capitalist who are most active in India.
Advantage of bringing a VC in the company
- The VC can provide practical advice and assistance to the company based on their experience and expertise with other companies with similar situations.
- They also have a network of contacts in many areas that can help the company in various segments.
- VC is also experienced in the process of preparing a company for an Initial Public Offer (IPO) of its shares onto the stock exchanges.
- VC provides long term finance and accepts to take a risk.
Stages of VC Funding
- Seed money
- First Round
- Second Round
- Third Round
- Fourth Round
Seed money is financing provide to initiate a project.
Start-up funding is early-stage firms that need funding for expenses related to marketing and product development.
First-round is for early sales and manufacturing funds.
The second round fund is working capital for early-stage companies that are getting sales but not able to make profits.
Third round funding is expansion money for a newly profitable company.
The fourth round is for facilitating public issues.