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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Fewer private U.S. venture-capital funds are raising money to invest in startups, the National Venture Capital Association says. The biggest players are at the top, the smallest are at the bottom and the midsize firms watch the clock tick.
Chris Anderson left one of the most prominent posts in tech media to become CEO of 3D Robotics, a company that helps hackers and engineers build do-it-yourself drones. Last fall he locked up a $5 million funding round.