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FAQs

Venture capital is financial and strategic support provided by private firms to start-ups with high growth potential.

Private equity firms generally invest in mature companies and prefer to buy majority ownership of companies and exercise some levels of controls while venture capital firms are almost always minority non-control investors.

A venture capitalist is a person or firm that provides resources to start-ups in the form of capital, advice, and relationships to help scale up and grow.  A venture capitalist receives equity in the company. The percentage of the equity often depends on the size of the investment made and on the extent of the risk involved.

Venture capital can help your company in more ways than one. While it can help you raise working capital, it can also offer other growth opportunities in the form of networks, expertise, and technology assistance. It can help your company grow and get exposure in the market.

Despite its many advantages, venture capital funding can have some disadvantages. One of the biggest disadvantages is reduced ownership stake of the founder. Moreover, a VC-funded startup is expected to grow rapidly within a short time and may lose funding if its performance does not meet expectations in the specified period.

Most venture firms can find companies through their networks, startup incubators, founders and industry leaders. Often, startups come to venture firms to seek funding.

In return for their funding, venture capitalists get an equity in their portfolio company, which can get them high financial returns, based on the company’s performance. Venture capitalists also expect the startup to go public within a certain period through Initial Public Offerings (IPOs), so that they can sell or distribute their holdings of the company and obtain financial returns. Successful IPOs can also add to the reputation of venture capitalists.

When investing, a venture capitalist looks for business ideas with a competitive advantage so that their portfolio company can generate enough sales and profits before market competition increases.

Angel investors use their own capital to invest in startups at a very early stages, whereas venture capital is aggregate capital from sophisticated and accredited investors for startups by venture capitalists.

One of the foremost things you must do to find venture capital is to network in the right circles. Participate in startup events, and other networking opportunities. Do your research about the venture capitalists that gravitate to your industry. Have a proper business plan, pitch profile, and an elevator pitch ready in time before you go ahead to apply for venture capital for your startup.

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