Definition Or Explanation: Institutional venture capital comes from professionally managed funds that have $25 million to $1 billion to invest in emerging growth companies.
Appropriate For: High-growth companies that are capable of reaching at least $25 million in sales in five years.
Supply: Limited. According to recent surveys from the National Venture Capital Association, U.S. venture capital firms annually invest between $5 billion and $7 billion. Many of these investment dollars go to companies already in the institutional venture capitalist's portfolio.
Best Use: Varied. From financing product development to expansion of a proven and profitable product or service.
Cost: Expensive. Institutional venture capitalists demand significant equity in a business. The earlier the investment stage, the more equity is required to convince an institutional venture capitalist to invest.
Ease Of Acquisition: Difficult. Institutional venture capitalists are choosy. Compounding the degree of difficulty is the fact that institutional venture capital is an appropriate source of funding for a limited number of companies.
Range Of Funds Typically Available: $500,000 to $10 million.
From Where's the Money? Sure-Fire Financing Solutions for Your Small Business, by Art Beroff and Dwayne Moyers. (c) Entrepreneur Press, 1999.