What It Is: Institutional venture capital comes from professionally managed funds that have $25 million to more than $1 billion to invest in emerging growth companies. Venture capital focuses on capital investments in private, young, fast-growing companies.
Appropriate for: High-growth, high-potential companies that are capable of becoming market leaders, and being profitable in five to eight years.
Best Use: Varied. From financing product development and commercializing promising technologies to building durable well-run businesses.
Cost: Expensive. Institutional venture capitalists purchase significant equity in a business. The earlier the investment stage, the more equity is required to persuade an institutional venture capitalist to invest. The range of funds typically available is $500,000 to more than $30 million.
Ease of Acquisition: Difficult. Institutional venture capitalists are choosy. Institutional venture capital is an appropriate source of funding for only a limited number of companies.
With venture-capital investment flocking to social-media startups, who will back nascent startups innovating in such critical industries as material science, sensors, robotics, medical devices and life sciences?