(VC) Venture Capital means investing in newly founded and growing companies. Investing in these companies is attractive because of their high growth potential and high efficiency. Companies by Venture Capital are chosen for investment, they usually operate in the fields of technology, software, internet and similar services. In these areas, due to high dynamics, rapid changes and fierce competition, companies need more capital to continue their growth and achieve their goals. Venture Capital they also help startups gain access to other resources, including connections and experiences of larger companies and other investors. Also, investing in young companies is considered as an opportunity to create wealth and create jobs for the society.
Keywords: Venture Capital, VC, venture capitalist, investment, startup
Venture Capital it is a form of private equity financing that focuses on investing in startups, companies is in the early and emerging stages. Financing is provided by companies or venture capital funds, which seek to invest in companies in these categories that they believe have high growth potential due to innovative things in their business model.
Venture Capital (VC) is a type of investment that individuals or companies invest in newly established or start-up projects in order to obtain more and higher profits.
The emergence of the Internet in the early 1990s gave rise to the growth of the Venture Capital industry; Because investors saw the launch of companies with very high growth potential. Since in the investment world, high profit is always associated with more risk, this type of investment is called risky investment.
This type of financing, which may not be financial in some cases, is done by people or companies who are hopeful about the future of a new project and want to invest in it in the early stages (seed startup). This capital is usually Awarded to small companies with high growth potential or companies that are rapidly growing and expanding. For this reason, this type of financing is called venture capital because the investors have not seen any performance or output from the project team and sometimes they count on the predictions and ideas that come up. Risk-taking investors usually become the main shareholders of these companies and participate in the company’s decisions. An important difference between venture capital and other private investments is that venture capital is focused on emerging companies seeking large capital; While private investment focuses on larger companies looking for working capital or capital injection. The second case can be in the form of shares and people can participate in investment by buying shares of companies.
In order to attract capital from VCs, startups must provide a road map and business plan and answer the investors’ questions as much as they can. If investors are interested, they will do their own research in a more complete way, since VCs provide large capitals for small companies, this research is an important part, when the research is finished, it is usually done step by step. It is given to the startup, this capital can only be in the form of
There is no money and it includes the provision of facilities and. is also At the end, after the completion of the period desired by the investors and in the form of transfer of shares, the investment banks come and buy the shares of the companies from the investors. In this way, other people can also enter the project.
The profits of VC companies are usually provided in two main ways:
Stock sale: When the start-up company is growing and succeeding, its stock value increases. in this case,the VC company can sell its shares and earn a profit in this way.
Growth and development of the company: With the development and growth of the start-up company, the value of the company’s shares increases. In this case, the VC company can not sell its shares and wait to increase its profits when it has a higher value. This usually happens when the start-up company goes public or if a larger company is bought by that company, the value of the VC company’s stock increases.
Another way is that wealthy individuals, insurance companies and organizations may pool their funds together and hand over control and management to a Venture Capital firm. This company invests in markets that are very risky and dangerous for investment from the point of view of banks and other capital markets. Usually, in addition to its commission, this company takes a percentage of the profit from the investment as a fee.
In general, VC companies operate by investing in start-up companies with the aim of earning profits in the future, and they earn their profits with the growth and success of the companies.
Advantages of using VC for small companies:
- Business experience and expertise
- More support
- Broader communication and networking
- Lack of obligation to repay the capital
- More trust
Disadvantages of using VC for small companies:
- Less ownership and less control
Because VCs allocate a lot of capital to these startups, they usually become members of the board of directors for a period of time (5 to 6 years) and they actively participate in many decisions and every decision must be accompanied by the investor’s satisfaction.
- Early withdrawal of the venture capitalist:
A VC firm can provide active support in a number of important areas, including legal, tax, and personnel matters, which is an important stage of a startup’s growth.
- Valuation lower than expected
VCs are usually in a hurry to sell their shares; As a result, the owner of the company may be under pressure to sell shares place to get their initial capital. This haste may cause unfair evaluation of the company and a low price is set for it.
Top VCs 2023:
1) Andreessen Horowitz
Andreessen Horowitz is an American Venture Capital investment firm founded in 2009 by Mark Anderson and Ben Horowitz. This company operates in the fields of information and communication technology, software, internet, objects, blockchain, robotics and other technology industries.
Andreessen Horowitz it gives new and local companies the opportunity to solve the problems that arise in the way of their growth with investment and financial support and helps them improve their products and market growth. This company is looking for projects that can respond to the problems that exist in societies by acquiring new ideas, through changing different industries and using technology.
Assets under management: $35 billion
Notable deals: Coinbase , Digital Ocean , Accolade , Slack , Pinterest , PagerDuty , Lyft , Okta
Investment in stage: Seed; Venture;Late_Stage
2) Sequoia Capital
Sequoia Capital it consists of a small team in Menlo Park, California. They started five decades ago and with starting their work with companies before their existence, they created a name for themselves only from the idea stage. One thing that sets them apart is that they don’t engage in an exit strategy like other venture capital firms.
They remain partners for a long time. They specialize in working with non-profit organizations such as hospitals and charities as well as technology companies. Their limited partner base allows them to spend personal time with each company they work with.
Assets under management: $28 million
Notable deals: Apple; Atari; Cisco; Google; Instagram; Airbnb; Stripe; Ford Foundation; Boston Children’s Hospital
Investment in stage: Seed; Early; Growth
3) Dragoneer Investment Group
Dragoneer Investment Group is a growth-oriented investment company supported by global endowments, foundations, independent investment funds and family offices. They focus on technology-based businesses and generational growth and support them throughout the growth stages of their journey. Their expertise is working with businesses on the verge of an initial public offering and taking them to the next stage in the public market. Dragoneer has a wide network and a lot of experience working in the field of technology. In the private market, they use methods such as the sale of secondary shares or convertible bonds instead of using the traditional method of raising capital.
Assets under management: $24 billion Notable deals:
Alibaba; Appfolio; Atlassian; Datadog; Slack; Spotify; Uber; Strava; Klarna; Chime; Databricks; Glassdoor; Discord; DoorDash
Investment in stage: Growth;IPO
4) intelligent Protocol
As a distributed protocol, the Intelligent Protocol uses blockchain networks to facilitate communication between individuals and companies, and utilizes distributed systems. The goal of the Intelligent Protocol is to create a distributed network of investments and support emerging projects. Additionally, the Intelligent Protocol enables secure and direct transactions for its users.
Other benefits of the Intelligent Protocol include launching a decentralized asset management system, utilizing artificial intelligence for startup validation and evaluation, and providing a unified platform for all necessary investment and payment processes. Furthermore, the Intelligent Protocol uses security mechanisms such as identity verification and digital signatures to prevent fraud in investment-related activities.
In summary, the Intelligent Protocol serves as a distributed platform that utilizes blockchain technology to create a distributed investment network and generate more opportunities for emerging projects.
Intelligent Ventures has created a fund that includes investments made through the Intelligent Protocol in promising startups, which includes some of the startups owned by Intelligent. The fund is available for investment to clients of the Intelligent Protocol, provided that the platform’s Robo-adviser allows them to take on risks. This means that clients can potentially benefit from investing in a diverse range of high- potential startups, with the guidance of Intelligent’s AI-based technologies and industry experts.
Competitive Advantages of Intelligent Ventures:
- Helping startups in various industries
- Utilizing AI in project approval process
- Experienced team and professional industry experts
- Providing decentralized investments through Intelligent Protocol
- Focus on high-potential early-stage startups
- Strong presence in both London and San Francisco
- Offers a range of funds to suit different investment goals
5) New Enterprise Associates (NEA)
New Enterprise Associates (NEA) is a venture capital investment firm founded in 1977 and headquartered in Menlo Park, California. NEA has become one of the largest and most active venture capital investment firms in the world, with offices in San Francisco, New York, Boston and India.
NEA It focuses on investing in early-stage companies operating in a variety of industries, including technology, healthcare, energy and consumer. NEA typically invests in companies that have strong management teams, proven business models and significant potential for growth. The firm also provides financial resources and strategic guidance to help its portfolio companies succeed. In addition to traditional venture capital, NEA also operates a growth capital fund that invests in early-stage companies looking to grow their businesses.
Assets under management: $17 billion
Notable deals: Databricks; Genies; Strive Health; Black Diamond Therapeutics; Robinhood; Aetion; Cloudflare; Trillium Therapeutics; Instabase
Investment in stage:Seed;Early Stage;Market Growth
6) Deerfield Management
Deerfield Management is a private equity firm founded in 1994 and headquartered in New York City. This company mainly operates in the health and pharmaceutical industries and invests in companies that operate in fields such as drug research and development, advanced medical devices and health technologies.
Deerfield Management It also invests in other areas, including companies active in the technology, energy, and social sectors. The purpose of this company is to create value for its investors and improve the health of society.Deerfield Management provides its invested companies with financial resources and strategic advice to help them develop and grow their business. The main goal of the company is to promote innovation and valorization of the health and life sciences industry.
Assets under management: $16 billion Notable deals:
Akari Therapeutics; ZymoGenetics; Stelexis Therapeutics; ISTA Pharmaceuticals; Exelixis; Children’s Health Fund
Investment in stage:Early;Growth;Late
VCs, as one of the important methods of investing in new and innovative companies, are very important for the development and growth of these companies. Also, various VC companies with diverse goals and fields of activity operate in this field and help start-up companies as a source of investment and strategic advice. In addition to investment, these companies help in the development and growth of businesses by providing services and advice to their invested companies, and they also benefit from the development of technology and scientific progress in various fields by cooperating with universities and research institutions. Investment by VC companies plays an important role in the development and economic growth of countries, focusing on the growth of start-up companies and innovation in various industries.
We analyzed top 6 Ventures in 2023-24 by our methods because we believe that, this field will continue to grow in years ahead. On the other hand, you should do your own research in each investment process and then start investing. I hope this article was useful.
Carolyn Coley is a blockchain reporter. She joined Smartereum after graduating from UC Berkeley in 2018.