Top 5 Venture Capital Business Insights 2022

Venture capital has a few well-kept secrets.

https://www.inc.com/jason-lemkin/5-best-kept-secrets-about-venture-capital.html

Venture capital is a field that benefits from being well informed. Newcomers into the business will greatly benefit from the top industry insights, and that’s what we are going to show for you today.

We will teach you what kind of VC you should be looking to work with, give you knowledge on VCs and give you a start on how to get started on the right track in this industry. Let’s begin with our top 5 venture capital insights.

1. Venture capitalists aren’t extremely well-rounded and don’t engage in many transactions.

You may think that venture capitalists are diverse and offer many different investments into different industries, but this is typically not the case. A VC will usually stick to one industry and continue their research and investments directed into similar businesses of the same industry type. This lets them have more experience in the industry and will allow them to make more low-risk investments in the future. Having a solid presentation with industry consciousness is a good way of obtaining investment into your start-up.

2. Start-ups are not the major industry goal in VC

It’s commonplace to think that VC is largely focused on start-ups. The concept of venture capital and start-ups seem to go hand in hand since they both are new and exciting investments and usually are innovative businesses. In reality, the numbers greatly favour established businesses that are in the process of commercializing their innovation and specifically developing the infrastructure for the continued growth of this part of the industry. In 1997,  $10 billion was invested by VC, but only 6% or 600 million of the money went into startups.

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3. V.C.s have to keep their investors pleased, too.

VCs are in the same boat as you when it comes to having to keep investors happy. They have investors as well, which are called Limited Partners or L.Ps. They need to keep the L.Ps in line with the project if they want to obtain money for future investments. The best VCs don’t need to persuade and spend time with their L.Ps as much as others and mainly just pick up cheques from them. L.Ps are individuals or legal entities. The term-limited partners refer to their passive role in the company. They do not direct operations at all, they simply provide capital for other partners to work the operations with.

4. Most V.C.s care about valuation gains; thus, they want you to raise a large round.

VCs earn money from:

  1. The company going public
  2. The company is being sold for a profit.
  3. Management fees.

To make management fees happen, a fund needs to be raised. If that fund is greater by 2 or 3 times the previous raise, you can inform the LPs how good investment was and the investment chain can continue.

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5. Small V.C.s can align with you, but it is also possible for them to underbid on your deal. Big V.C.s are less aligned, but they can pay more.

You may come to a point in the life of your business where you have to choose between a small VC or a large VC.

In general, small VCS are easier to work with due to the size and scope of their business. Their investment is non-demanding. It is limited however by their valuation since the amount of money they can offer is typically capped at the size of the percentage of their ownership.

Large VCs can write you big checks and often need to operate to their will and own a large percentage of the project. They can do drastic things with this, like firing the founders or CEO. The offset to this is they will grant you more money to go big.

Both decisions have their positives and negatives, the key is to choose one that fits the vision that you have of your enterprise.

Fun Fact

Fun Fact

Top 5 Venture Capital Business Insights

The largest venture capital funds are General Atlantic with $31B. Hillhouse Capital Group with $30B. Insight Venture Partners with $18B. Iconiq Capital with $14.5B. Tiger Global Management with $10B. New Enterprise Associates with $10B. Norwest Venture Partners with $7.5B. Greenspring Associates with $7.5B.

Noah Murphy
Noah Murphy
If Life is just a game and luck is for losers - Then I am winning the game

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