Venture capital funds are pooled investment funds that manage the money of investors who seek private equity stakes in startups and small- to medium-sized enterprises with strong growth potential. These investments are generally characterized as very high-risk/high-return opportunities.
In the past, venture capital (VC) investments were only accessible to professional venture capitalists, but now accredited investors have a greater ability to take part in venture capital investments. Still, VC funds remain largely out of reach to ordinary investors.
VCFs are some of the ways to avail financing for entrepreneurs and small business owners. However, a VCF will only invest in firms that project significant growth potential and the ability to generate high ROI in the long run. As investments are made in new ventures, the risk associated is also comparatively high.
That’s why VCFs invest in multiple companies at once. This is done by having confidence that at least a few among the lot will be able to produce high returns and assuage the losses, if any, incurred by the others.
Pros – No obligations for repayment, Beneficial for creating networks and connections, Paves the way for expansion, Offers crucial business expertise. Cons –Securing funding can take a long time, Forfeiture of complete control and ownership. Venture capital funds still continue to be one of the top sources of funding for start-ups irrespective of its drawbacks – the foundation of VCFs date back to 1946, in the USA. Georges Doriot, Ralph Flanders, and Karl Compton established the company American Research and Development Corporation (ARDC), which influenced private-sector investment in companies that were being established by soldiers returning from WW2. Georges Doriot is called the father of venture capitalism.
Landmark VC Fundings:
- Facebook’s $22B acquisition of WhatsApp in 2014 was the largest private acquisition of a VC-backed company ever at the time. It was also a big win for Sequoia Capital, the company’s only venture investor, which turned its $60M investment into $3B.
- Facebook‘s $16B IPO at a massive $104B valuation was a huge success for early investors Accel Partners and Breyer Capital. The firms led a $12.7M Series A into Facebook in 2005, taking a 15% stake in what was then called “The facebook.”
- Groupon‘s IPO in 2011 was the biggest IPO by a US web company since Google had gone public in 2007. Groupon was valued at nearly $13B, and the IPO raised $700M. At the end of Groupon’s first day of trading, early investor New Enterprise Associates 14.7% stake was worth about $2.5B. But the biggest winner from that IPO was Groupon’s biggest shareholder, Eric Lefkofsky.
- When Cisco acquired Cerent in 1999, the $6.9B deal was the biggest acquisition ever for a tech company. And for Kleiner Perkins Caufield & Byers, which invested $8M in the company, it resulted in a huge multibillion-dollar payday.
I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.
If you are interested in participating in the same, do let me know.
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We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge