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A Venture Capitalist (VC) is a privatized equity investor or financing that is issued by venture capital firms or funds to companies, startups, beginners and emanating companies with top growth potential (in terms of number of workers, measure of operation, annual revenue etc) in return for an equity share. The Venture capitalist challenges the risk of financing perilous startups with an intention of getting successful by their supporting firms. As startups can be unpredictable, also the failure history is high in the case of Venture capitalist investment. Usually, the startup is built based on an ingenious technology or business type and emerges from high technology industries such as clean technology, biotechnology and information technology/ IT.
Here this article will provide you information regarding the Venture Capitalist, how it works, the business type they invest in and some other basic guidelines for seeking VC funding for your business.
How does a Venture Capitalist Work?
- A Venture Capitalist investment is a model of equity financing. The VC investor regulates funding in exchange for having an equity spot in the company. Normally, the equity financing is utilized by unrecognized businesses that are impotent to take debt financing as financial loans from financial organizations.
- The disadvantage is, there is a chance of losing some of your ownership in the business. Venture capitalist may be a wrong choice in case if the entrepreneur chooses to hold on to the authority of their business. As a return for allowing funding. Most of the voting rights or special veto rights are obtained by the VC firm (either via achieving most of the shares or class of shares preferred). In case of share sale, the Venture Capitalists have the authority for compensation.
- Beyond the cash injection, there are merits to expanding equity to venture capitalists. Majority of VCs are pro or business experts. In the case of a great idea with less experience to proceed, it is good to put an expert to the company as a venture capitalist.
- Normally, in a business venture capitalist invests for a long period. They will continue with the small business for years until it grows up to a position that its equity shares have value and the company spreads over the public. Once they reach the target point, the Venture capitalist investor exits the company, benefiting the profits obtained from emerging startups.
Role of a Venture Capitalist
A Venture capitalist (VC) creates financial choices that influence years of business development. A VCs daily task includes making decisions on investment, mentorship for upcoming companies and business analysis. The other roles and responsibilities of venture capitalist are given below;
1. Investment with New Team
A Venture Capitalist aids in making alteration by funding the requirements of a startup. They make investments with a company in return for part in the profit and planning authority within the business. Usually VC performs within a firm to look for investment options for their own audience. It’s the responsibility of a Venture Capitalist to examine the risk involved and the growth of an emanating business, and thus make deals with companies that can vow success. The Venture Capitalist makes a way around once after the decision is made by the VC firm. They make an estimation of the amount of money needed for new business. Also determine the company’s profit share.
2. Assigning Business Specialist
Venture Capitalist takes the role as a contributor in a new company’s business operation. They also take part in decision making for a business to grow, serve the board, hire management and build relationships between startups and new investors. VCs add an expertise to the company, in assisting them to reach their goal (base to a profitable business).
3. Controlling Funds
As Venture Capitalist does funding privately, the VC is charged to a team of partners who gives the cash for investment. The Venture Capitalists invest funds into a fresh company with intention to build profits. Investment partners find a Venture Capitalist in order to make a perfect plan with their funds.
4. Shutting Down an Investment
Venture Capitalists will reach an agreement on exit policy that will lead a firm to the termination of their investment generally, after the duration of three to seven years. They will assist the company leader either to sell their business or to bring their stock to the public. So, Venture Capitalists are no longer required to improve the company. After the termination of the account, the VC provides their partners with a return on their investment which makes the process valuable. However, they proceed to control other investments while in search of the next opportunity, obtaining commissions and benefits from each venture.
Venture Capitalist in India
Top Venture Capitalist of India is tabulated below;
|Venture Capitalist in India||Founder||Deals||Remarkable Investment||Lead Sectors||Stage|
|Sequoia Capital||Donald T. Valentine (1972)||245+ (FY20)||Apple, Oracle, Google, Nvidia, PayPal, GitHub, whatsapp, Klarna, PicsArt, Bird, Linkedin, Stripe, Instagram, Youtube, Yahoo||Agnostic||Seed, Late Stage, Early Stage Venture|
|Accel||Jim Swartz, Arthur Patterson
|232+||Swiggy, Freshworks, Flipkart, Bounce, BlackBuck, BookMyShow||Agnostic||Late Stage Venture, Early Stage Venture, Seed|
|Blume Ventures||Karthik and Sanjay
|124+||Milkbasket, HealthAssure, Dunzo, Instamojo, Uncademy, Procol||Agnostic||Early Stage Venture, Seed|
|Elevation Capital||Andrew Yan
|100+||Cleartax, Aye Finance, Capital Float, Swiggy, Rivigo, Firstcry, IndustryBuying||Agnostic||Private Equity, Stage Agnostic|
|Tiger Global Management||Chase Coleman III
|97||Razorpay, OPEN, Flipkart, Ninjacart, Urban Company,Moglix||Software, Internet, Financial Technology, Consumer||Post –IPO, Late Stage, Growth, Private Equity|
|Kalaari Capital||Vani Kola
|92||Snapdeal, Milkbasket, Cashkaro, Jumbotail, Myntra,Cure.fit, WinZO||Agnostic||Early Stage|
|Matrix Partners||Paul J. Ferri
|80||MoEngage, Avail Finance, Stanza Living, Vogo, DailyNinja||Agnostic||Seed, Early Stage Venture|
|Nexus Venture Partners||Sandeep Singhal
|80||Zomato, Bolo App, WhiteHat Jr, Unacademy, Rapido, Pratilipo, Jumbotail, Druva, Delhivery||Agnostic||Seed, Early Stage Venture|
|Indian Angel Network||Saurabh Srivastava, Padmaja Ruparel, Raman Roy
|80+||Little Black Book, WebEngage, Druva, Wow! Momo, Box8, Faballey||Agnostic||Early Stage, Seed|
|Omidyar Network India||Pierre Omidyar
|71+||WhiteHat Education Technology, Dailyhunt, ZestMoney, Doubtnut, Indifi Technologies, Needslist, 1mg, Bounce, ZestMoney, HealthKart, Platzi, Pratilipi||Agnostic||Early Stage, Seed Stage|
Steps Involved in Venture Capital Financing
- Create a sound business plan or strategy
- Nominating Venture Capitalist funds
- Arrange terms and conditions of financing
- Capital organizing
- Raising teams
- Determining exit option
The main factor affecting the Venture Capitalist will be risk and return. As earlier a Venture Capitalist invests, more will be inborn risk and prolonged will be the time period until the Venture Capitalist shut down. However, VCs have their own history and topography. Venture Capitalists enhance the growth of a business industry that needs appreciation of strong knowledge based funding.