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Venture Capital

About Venture Capital

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What is Venture Capital (VC)?

Venture Capital is a financing tool for companies and an investment vehicle for wealthy individuals and institutional investors. Wealthy investors like to invest their capital in startups with a long-term growth perspective. This capital is called venture capital and the investors are called venture capitalists, in other words, it is a way for companies to receive money in the short term and for investors to grow wealth in the long term.
 
Venture Capitals tend to focus on emerging companies and such investments are risky as they are illiquid, but also have the potential to provide impressive returns if invested in the right venture.

A venture capital firm can finance a company by equity participation and capital gains, participating in debentures and also extending conditional loans to the firms.
 

Funding process for VCs

Venture Capital firms raise money from banks, corporations, funds. The firm or investor, if interested in the proposal by the company who has submitted the business offer, then performs due diligence, which includes a thorough investigation of the company's business model, products, management, and operating history, among other things.
 
VCs have the power to influence the decision-making in the company, monitoring its progress before releasing additional funds and guide the business to profitable growth. The investors then exit the company after a period of 4-6 years after the initial investment by means of a merger, acquisition or an initial public offering or IPO.

Advantages of VCs

1. They bring wealth and expertise to a startup as bankers are skeptical to lend money in the early stages due to lack of assets that can be hedged as collateral. This also helps VCs to take control of the firm and have a say in the company's growth.
 
2. Large sums of equity finance can be provided as startups do not stand the obligation to repay money which helps in accelerating their growth.
 
3. VC firms are better equipped to evaluate early-stage startups, using methods that go beyond financial statements — such as product, market-size estimates, and the startup’s founding team. Further, the equities are uncapped and so there is no upper limit to how much an investor can earn.
 

Watch Video: What are the various types of start-up investors?

Latest Updates on Venture Capital

This has meant that the share of total assets has fallen to 1.8 per cent in March 2023 from 3.4 per cent in March 2019 as seen in chart 1 (click image for interactive chart).

Updated On: 06 Jun 2024 | 2:28 PM IST

A shakeout among fintech firms is very likely, as the stress on governance and compliance is set to go up many notches

Updated On: 09 Apr 2023 | 4:37 PM IST

The solutions lie with the Fed, VCs, in-house management, and Silicon Valley itself

Updated On: 05 Apr 2023 | 11:43 PM IST

Speciale Invest, a venture capital firm that has funded space and technology startups such as Agnikul Cosmos and QNu Labs, announced a new fund with a Rs 200 cr corpus to provide funding in deep-tech

Updated On: 05 Apr 2023 | 2:40 PM IST

V3 Ventures, Co-Founder and Investment Partner, Arjun Vaidya said that the company plans to invest the rest of the fund in the US and Europe

Updated On: 04 Apr 2023 | 7:48 PM IST

With a dramatic fall in venture capital and private equity funding, Indian start-ups are pulling up their socks, cutting losses, and trying to turn profitable

Updated On: 31 Mar 2023 | 6:10 AM IST

There's no clear consensus on whether to celebrate or blame VCs who told founders to pull out their money

Updated On: 16 Mar 2023 | 9:31 AM IST

Fund of Fund for start-ups (FFS) managed by SIDBI's venture capital arm has given money to AIFs, which are in turn supporting over 800 start-ups

Updated On: 15 Mar 2023 | 11:09 PM IST

The global economic downturn has made investors reconsider their commitments towards the deployment of capital into new-age firms

Updated On: 15 Mar 2023 | 12:10 PM IST

Silicon Valley Bank became the financier to tech stars by offering an array of products tailored to their needs, that few other institutions dared

Updated On: 14 Mar 2023 | 9:16 AM IST

Razorpay is offering domestic start-up clients to move their money into their Indian current accounts as FDI through the firm's partner banks

Updated On: 12 Mar 2023 | 10:31 PM IST

Investors are starting to realise that new-age companies are a completely different animal

Updated On: 06 Mar 2023 | 10:16 PM IST

RPSG Capital Ventures on Tuesday announced USD 2.5 million in an oral care brand to expand its consumer D2C portfolio

Updated On: 28 Feb 2023 | 8:29 PM IST

71% of founders of early-stage companies plan to raise venture debt this year

Updated On: 17 Feb 2023 | 5:57 PM IST

With late-stage funding rounds becoming tougher, they are focusing more on due diligence, profitability path, governance and early entry into companies at lower valuations

Updated On: 12 Feb 2023 | 4:50 PM IST

Despite this decline, 2022 marks the second-best year for PE/VC investments in India to date; dip largely due to smaller deal sizes amid stable volumes

Updated On: 27 Jan 2023 | 6:47 PM IST

India accounted for 5.1 per cent and 6.3 per cent share of global VC funding value and volume, respectively, in 2022

Updated On: 24 Jan 2023 | 4:42 PM IST

Firm will invest in financial services, healthcare tech, enterprise software space

Updated On: 19 Jan 2023 | 7:43 PM IST

Leading global and domestic institutions and family offices, including HDFC Life and SIDBI, participated in the fund

Updated On: 17 Jan 2023 | 11:27 AM IST

Tredence is looking at Advent International to not only grow geographically but also support them in expanding into new verticals like healthcare, life inorganic sciences, and insurance

Updated On: 04 Jan 2023 | 4:02 PM IST