Glossary - Venture Capital
Venture capital is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks, and any other financial institutions. However, it does not always take a monetary form; it can be provided in the form of technical or managerial expertise.
Also known as
- VC
- Risk Capital
Use cases examples
- Term Sheet: The term sheet outlines the investment terms and conditions agreed upon between the startup and the venture capital firm.
- Shareholder Agreement: The shareholder agreement specifies the rights and obligations of the founders and the venture capital investors, including governance, voting rights, and exit strategies.
Considerations for investors
- Conduct thorough due diligence to assess the viability and growth potential of the business.
- Negotiate terms that protect the investment, including anti-dilution provisions and board representation.
- Consider the long-term commitment required and the likelihood of achieving a successful exit.
Considerations for founders
- Understand the dilutive impact of venture capital financing on ownership and control.
- Be aware of the potential changes in company culture and decision-making processes post-investment.
- Consider the expectations venture capital investors have regarding growth and exit strategies.
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