The focus of a fund is the centerpiece of your Investment Thesis, which you will use extensively to attract like-minded Limited Partners. Why is it important to be specific with the focus of a fund? Capital may be used to finance increased production capacity, market or product development, and/ or to provide additional working capital.What is the focus of a venture capital fund?Ī venture capital fund will normally focus on three areas: a specific (1) stage, (2) geography, and (3) industry or market.įor example, "seed-stage SaaS startups in Vietnam."įor most venture capital funds, very clearly defining at least two out of the three areas above is important. However, for new venture capital fund managers, the fund focus typically starts a bit more vague in order to provide maximum flexibility in securing initial capital and doing deals. Expansion: Sometimes known as ‘development’ or ‘growth’ capital, provided for the growth and expansion of an operating company which is trading profitably.These companies may or may not be profitable, but are more likely to be than in previous stages of development. Late stage venture: Financing provided to companies that have reached a fairly stable growth rate that is, not growing as fast as the rates attained in the early stage.Other early stage: Financing provided to companies that have completed the product development stage and require further funds to initiate commercial manufacturing and sales.Companies may be in the process of being setup or may have been in business for a short time, but have not yet sold their product commercially. Start-up: Financing provided to companies for use in product development and initial marketing.Seed: Financing that allows a business concept to be developed, perhaps involving the production of a business plan, prototypes and additional research, prior to bringing a product to market and commencing large-scale manufacturing.The BVCA defines the stages of VC investment as: There are different types of venture capital funding depending on the maturity of the business. Venture capital houses typically hold their investments for between five and seven years, at which point the business will either be floated on the stock exchange, acquired by a multinational corporation or another investor such as a private equity house. Together, these form what is known as the ‘innovation eco-system’, a funding chain that provides capital and business expertise to early-stage, fast-growing companies at different stages in a company’s life. Many start-ups will also receive funding prior to Series A, via angel investment, crowdfunding, grants, incubators or even friends and family. Early-stage companies raise money in ‘rounds’ - Series A, B, C etc - which will see further investment from either the same investors and/or new ones to support the company as it grows. VCs take minority stakes in businesses, very often alongside other VCs and investors. In the UK, this includes the likes of Wise, Moonpig and Skyscanner, and globally household names such as Google, Facebook and Skype all received venture backing in their early stages. Many of the world’s best-known companies began life with venture capital funding. Businesses seek venture capital investment for a number of reasons, such as to grow their manufacturing and sales operations, enhance their product development and/or expand their business and hire new staff. Venture capital, by contrast, will invest in new companies, many, if not most, of which will not yet be making a profit, but which have a disruptive business offering with the potential of very strong growth.
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