Knowledge Base

The venture capital industry has dramatically influenced the manner in which all investors invest. Even though relatively few firms receive VC funds, the investment process—no matter who the investor is—is guided by the same general principles, terms, and conditions that have been developed by VCs. As an entrepreneur, you must understand at least the basic concepts outlined in this chapter. You must also make sure that your financial projections generally achieve the returns that your target investors are seeking.

 

Due to the costs associated with supporting a VC fund, the returns that you produce for VCs must be higher than that for other types of investors, who may have less overhead and profit-sharing costs to offset to obtain their desired outcome. While obtaining VC financing can be very challenging, especially from top-tier funds, the benefits can be substantial. Having a good VC investor aboard will provide strong validation for your business, help you attract other investors and top service providers, and improve your ability to land top employees.

 

That is not to say that you fold your tent if you cannot land VC capital. VCs focus on high-risk, high-reward opportunities. If your business is lower risk and provides moderate returns, you are still very likely to find investors that match your business profile. Not every investor is looking for high-risk investments, after all.