History of Venture Capital
The roots of venture capital may be linked directly to the post-war era, when investors recognised the possibility of supporting high-risk, high-reward initiatives. Georges Doriot launched the first venture capital business, American Research and Development Corporation (ARDC), in 1946. The most famous investment made by ARDC was in Digital Equipment Corporation, which produced a massive return on investment and helped demonstrate the potential of venture capital finance.
In the decades that followed, the venture capital industry gained popularity, notably in Silicon Valley, where it played an important role in the rise of the technology sector. During the 1970s and 1980s, renowned venture capital firms such as Sequoia Capital, Kleiner Perkins, and Accel Partners emerged, funding early-stage tech titans such as Apple, Cisco, and Google.
What are Venture Capitalists & How it Works?
Venture Capitalist (VC) is defined as an investor in private equity who lends money to companies with strong development potential in exchange for a stake in the company. A venture capital investment could include backing startup projects or assisting small businesses that want to grow but lack access to equity markets. Typically, venture capital firms are organised as limited partnerships (LPs), with the partners investing in the VC fund. Investment choices are typically made by a committee. Once potential businesses have been discovered, the aggregated investor capital is committed to sponsoring these companies in exchange for a significant equity interest. Contrary to popular opinion, venture capitalists do not typically support startups at the beginning. Rather, VCs search out companies that are generating income and are searching for additional funding to commercialise their ideas. The VC fund will invest in these companies, foster their expansion, and strive to exit with a high profit.
Table of Content
- Features of Venture Capital
- History of Venture Capital
- How Venture Capital Works?
- Types of Venture Capital
- When Should One go for Venture Capital Funding?
- Advantages of Venture Capital
- Disadvantages of Venture Capital