The Niche of Venture Capital
The typical working day for a Venture Capitalist involves early morning meetings and late night phone calls. In early stages, the venture capitalist is responsible for setting up a sample product and doing administrative costs. Later, as the business matures, he may issue successive rounds of funding. These subsequent funding rounds create the perfect market environment for the VC to exit. The typical VC’s pay structure caps their upside once the company goes public.
Because of these constraints, Venture Capital has found a niche. The structure of the capital markets makes it difficult for start-ups to get financing from traditional sources. For example, high net-worth individuals, or angel investors, are the main source of funding. These individuals often are former entrepreneurs or have built a large business empire. Private equity firms or individual investors are typically involved in venture capital deals. Once the investment round is complete, VCs may decide to invest in the company.
The first stage is often referred to as the emerging stage. It typically coincides with the company’s market launch or about to make its first profits. Funding in this stage typically goes toward increased marketing, product manufacturing, and sales. Unlike earlier stages, funding amounts for this stage are usually larger than those of earlier stages. This is the reason why it is important for start-ups to find a suitable industry for their business before raising venture capital.
Venture Capital is an ideal investment for high-tech startups. The growth of the tech ecosystem led to a concentration of venture capital on the West Coast. However, the early days of venture capital were characterized by a relatively low number of deals in the northeast. Despite these factors, however, many entrepreneurs were able to obtain funding from the northeast. These companies were funded by industrialist Sherman Fairchild and several other east coast entrepreneurs. These companies were later referred to as “angel investors” because of their success.
Because of the structure of the capital markets, venture capital is often the only institution that is able to finance start-ups. This means that people with innovative ideas often have no alternative but to look for venture capital. The specialized nature of the industry has made it possible for a VC to fill this niche. Its goal is to help start-ups launch and grow. The VCs have the ability to provide this funding.
In the 1980s, the VC industry saw its first major fundraising year, with an industry that raised $750 million. ERISA had previously prohibited risky investments in privately-held companies. Fortunately, the US Labor Department relaxed these regulations in 1978, and VCs could now invest in these companies without the need for private equity funds. The rise of the internet has also created a new market for venture capitalists, and the VC industry has become a major player in the technology sector.
