A venture capital fund is a type of funding that gives access to funds to entrepreneurs and small businesses. It is run by venture capital companies.

These venture capital firms manage the money from investors who are looking for private equity in a startup or small and medium-sized enterprises with a strong growth perspective.

Venture capital generally comes from high net worth individuals, pension funds, insurance firms, investment banks, and other private entities. While VC investments are donated as money, sometimes the contributions can be in the form of technical or managerial expertise.

VC funds invest in high return profile startups or small businesses. They base their investment decisions on the assets, size, and stage of product development for the startup.

Types of Venture Capital Fund                       

A venture capital fund may specialize in any of these types of funding.

Seed Capital

VC funds are offering seed capital for new startups to help them get started. VC firms usually do not fund at this stage. This is mostly a small amount if they do. The capital can be used to finance research and development of products, and to pay for administrative costs.

Startup Capital

Startups at this stage may already have their sample products and have grasped their market size. They need to scale up that capital. They may use it for recruitment, additional market research funding, and better distribution of the product.

Early Stage Capital

A startup may already have taken off in two to three years. They have a strong management team, and sales start picking up. At this stage, VC funding can further boost sales and increase operating efficiency.

Expansion Capital

An established firm can look for venture capital funds from the name itself to grow its business. Companies at this stage wish to enter or shore up their marketing strategies to emerging markets. Seek out VC firms specializing in late-stage funding.

Late Stage Capital

A company has reached sales goals and revenues at this point and is looking to exceed it. They are well placed to hire for second-level management. They may be looking as their working capital for additional funds.

Bridge Financing

A phenomenally successful firm may look into mergers or acquisitions (M&A) opportunities. Some VCs target at the end of a spectrum of businesses.

People involved in a Venture Capital Fund

• Entrepreneurs
• Investors
• Investment banks
• Venture Capitalists