Venture capital is money invested by venture capital “firms” into fast growing companies. These firms or funds are also called venture capitalists.
What is venture capital?
We have put quotes around the word ‘firms” as recently the line between angel investors and venture capital is blurred. Below is a brief description of each venture capital category.
A venture capital firm groups together the investment of several investors into a fund. Each investor then becomes a limited partner. Investors can be individuals, businesses and corporations but also other funds.
Most venture capital funds have a lifetime of 5-10 years. That is the time that is allotted to invest all the capital and return profits to the investors.
One single venture capital firm can raise several funds in different sectors, time horizons and deal sizes.
CVC (corporate venture capital) are funds set up by large organisations such as Google Ventures or Salesforce ventures. This category is growing fast as tech businesses are gaining resources and progressively becoming the largest businesses in the world.
Family offices are privately held companies that manage the investments of a wealthy family. Traditionally risk averse and closely linked to private equity, these entities have been joining forces with aggressive venture capital firms to invest in fast growing tech companies.
Large angel investors can have their own researchers and admin staff. The structure will be run like a family office but with the targeting and aggressiveness of an early stage venture capital fund.
Some angel investors get together in business angel syndicates. Here, the syndicate will generally see more deals than an individual angel and the angel can decide whether or not they would like to invest.
Accelerators and incubators are generally backed by large corporate organisations that are trying to dip their toe into innovation by helping young businesses grow within their framework. They will invest in startups with funds but also mentorship and partnerships.
At VCTracker, we track pure venture capital firms as a priority, however as a free bonus, we also list active players in other sectors.
Discover the 4 main options to raise early stage venture capital for your business in the UK.
Venture capital explained in a glossary type article with all the jargon in plain english.