What is Venture Capital?
Venture Capital is a type of financing that investors provide to startups that they believe to have long-term potential. These sorts of investments usually come from well-established investors, investment banks, or other types of financial institutions.
Venture capital has become an increasingly popular way of fundraising for small ventures, especially for the ones who don’t have access to bank loans or other forms of debt. However, the main downside to venture capital is that the investor usually gets equity in the company, and has a say in some of the company decisions.
Types of Venture Capital
Venture Capital is divided according to the growth stage of the company that is getting the funding. These stages are:
- Pre-seed: This is the earliest stage of business development when the founders try to turn an idea into a concrete business plan. They may enroll in a business accelerator to secure early funding and mentorship.
- Seed Funding: This is the point where a new business seeks to launch its first product. Since there are no revenue streams yet, the company will need VCs to fund all of its operations.
- Early-Stage funding: Once a business has developed a product, it will need additional capital to ramp up production and sales before it can become self-funding. The business will then need one or more funding rounds, typically denoted incrementally as Series A, Series B, etc.
