Venture Capital Basics

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.

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Today's Most Read

News and Articles About Venture Capital

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Uber Competitor Sidecar Now Lets Drivers Set Their Own Prices

With a $10 million venture capital infusion and a revamped business model, the lesser-known ridesharing app revs up to roll over the competition.
Kim Lachance Shandrow
Peter Thiel's Newest Obsession: Nanotechnology.
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Peter Thiel's Newest Obsession: Nanotechnology.

The co-founder of Palantir and PayPal has invested in and joined the board of Nanotronics Imaging, a microscopy and software company.
Catherine Clifford
13 Startup Red Flags to Avoid
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13 Startup Red Flags to Avoid

Companies plagued by any of these problems are likely headed for failure.
George Deeb
ZenPayroll Raises $20 Million in Series A Funding
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ZenPayroll Raises $20 Million in Series A Funding

The cloud-based payroll company plans to hire more employees and extend its reach.
Nina Zipkin
This Startup Just Raised $23 Million Thanks to Wealthiest Man in Asia
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This Startup Just Raised $23 Million Thanks to Wealthiest Man in Asia

Egg-replacement startup Hampton Creek has raised its biggest round of funding to date thanks to the investment of Asian billionaire Li Ka-shing.
Online Marketplace Abe's Market to Start Funding Organic Businesses
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Online Marketplace Abe's Market to Start Funding Organic Businesses

The team behind online marketplace Abe's Market already gives natural product entrepreneurs a platform to showcase their products. Now, they want to help them grow their businesses by making direct investments.
Laura Entis
'Funded' Doesn't Necessarily Mean 'Validated'
Finance

'Funded' Doesn't Necessarily Mean 'Validated'

While an absence of funding can feel discouraging, don't let investment serve as the sole barometer for the worth of your enterprise.
Wil Schroter
What Keeps a City's Startup Scene Hot? Cambridge Shares Its Secrets.
Technology

What Keeps a City's Startup Scene Hot? Cambridge Shares Its Secrets.

Tech firms don't just fall from the sky; the nation's leading hubs foster a favorable business climate for innovation. But, as those in Cambridge, Mass., will tell you, the rest is up to the locals.
Tanya Benedicto Klich
The 3 Decisions We Didn't Make That Totally Changed Our Business
Growth Strategies

The 3 Decisions We Didn't Make That Totally Changed Our Business

With some decisions, it's better to not decide-- yet.
Lloyd Tabb
Why So Many Startups Never Reach Their Second Funding Round
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Why So Many Startups Never Reach Their Second Funding Round

Seed funding often gives a company more opportunities to fail, not succeed.
Ever Heard of a Patent Map? They Can Help Predict the Future.
Growth Strategies

Ever Heard of a Patent Map? They Can Help Predict the Future.

By presenting dense technical text in a simple visual format, patent maps can be efficient tools for reading a competitive landscape, preforming due diligence and even forecasting upcoming trends.
Laura Entis
When to Say No to Venture Capital
Finance

When to Say No to Venture Capital

Instead of seeking financing, Ryan Smith spent four years bootstrapping to get his company off the ground. Here's why.
Michelle Goodman
Silicon Valley VCs Are More Confident Than They've Been in Years
Finance

Silicon Valley VCs Are More Confident Than They've Been in Years

Confidence among West Coast startup investors has reached a level not seen since 2007. For some VCs, though, the level of excitement is something to be cautious about.
Catherine Clifford
Who Would Win the VC Super Bowl: Washington or Colorado? (Infographic)
Finance

Who Would Win the VC Super Bowl: Washington or Colorado? (Infographic)

As the Seahawks and the Broncos prepare for the Super Bowl, Washington and Colorado go head to head in venture capital activity.
Kate Taylor