venture capital

Firms and funds[edit]
Venture capitalists[edit]
A venture capitalist is a person who makes venture investments, and these venture capitalists are expected to bring managerial and technical expertise as well as capital to their investments. A venture capital fund refers to a pooled investment vehicle (in the United States, often an LP or LLC) that primarily invests the financial capital ofthird-party investors in enterprises that are too risky for the standard capital markets or bank loans. These funds are typically managed by a venture capital firm, which often employs individuals with technology backgrounds (scientists, researchers), business training and/or deep industry experience.
A core skill within VC is the ability to identify novel technologies that have the potential togenerate high commercial returns at an early stage. By definition, VCs also take a role in managing entrepreneurial companies at an early stage, thus adding skills as well as capital, thereby differentiating VC from buy-out private equity, which typically invest in companies with proven revenue, and thereby potentially realizing much higher rates of returns. Inherent in realizing abnormally high ratesof returns is the risk of losing all of one's investment in a given startup company. As a consequence, most venture capital investments are done in a pool format, where several investors combine their investments into one large fund that invests in many different startup companies. By investing in the pool format, the investors are spreading out their risk to many different investments versustaking the chance of putting all of their money in one start up firm.



Diagram of the structure of a generic venture capital fund
Structure[edit]
Venture capital firms are typically structured as partnerships, the general partners of which serve as the managers of the firm and will serve as investment advisors to the venture capital funds raised. Venture capital firms in the United States mayalso be structured as limited liability companies, in which case the firm's managers are known as managing members. Investors in venture capital funds are known as limited partners. This constituency comprises both high net worth individuals and institutions with large amounts of available capital, such as state and private pension funds, university financial endowments, foundations, insurancecompanies, and pooled investment vehicles, called funds of funds.
Types[edit]
Venture Capitalist firms differ in their approaches. There are multiple factors, and each firm is different.
Some of the factors that influence VC decisions include:
Business situation: Some VCs tend to invest in new ideas, or fledgling companies. Others prefer investing in established companies that need support to gopublic or grow.
Some invest solely in certain industries.
Some prefer operating locally while others will operate nationwide or even globally.
VC expectations often vary. Some may want a quicker public sale of the company or expect fast growth. The amount of help a VC provides can vary from one firm to the next.
Roles[edit]
Within the venture capital industry, the general partners and otherinvestment professionals of the venture capital firm are often referred to as "venture capitalists" or "VCs". Typical career backgrounds vary, but, broadly speaking, venture capitalists come from either an operational or a finance background. Venture capitalists with an operational background (operating partner) tend to be former founders or executives of companies similar to those which thepartnership finances or will have served as management consultants. Venture capitalists with finance backgrounds tend to have investment banking or other corporate finance experience.
Although the titles are not entirely uniform from firm to firm, other positions at venture capital firms include:
Position
Role
Venture partners
Venture partners are expected to source potential investment...