Venture Capital（十六）.docVIP

Venture Capital Entrepreneurs rely on the venture capital industry to fill the “non-bankable gaps” that arise during business growth. This multi-billion dollar industry has helped thousands of firms leverage new opportunities by providing seed and growth capital. Venture capital represents the principal source of private growth equity investment around the world. Venture capital comes in various shapes and sizes; no doubt, adding to the mystery and confusion surrounding it. The goal of this chapter is to provide entrepreneurs with a better understanding of the sources of venture capital and how it works. This chapter essentially answers the question, “What is venture capital?” Types of Venture Capital Venture capital is a private equity investment in entrepreneurial companies used to finance the operating (working capital) and asset needs of growing businesses. The market is composed of two types of venture capitalists – informal “angel” investors and formal merchant banking institutions. Informal Investors Angel investors are usually self-made millionaires between the ages of 40 and 60. As one might suspect, they tend to be well-educated and savvy investors. They may invest alone or with a syndicate (group) of angel investors. Most angels share a common desire to help fledgling entrepreneurs and their local communities. There are over 250,000 angel investors in the United States. Each year, these wealthy individuals invest in 20,000 to 30,000 companies, dwarfing the 3,000 to 3,500 annual investments made by formal U.S. investors. Informal investors typically make investments in the $20,000 to $50,000 range. Since formal investors generally have minimum financing requirements of a million dollars or more, informal investors fill a vital financial resource gap for small businesses. Only 30 to 40 percent of all businesses seeking informal investment actually succeed in raising venture capital. Although this may seem like a small percentage, it i