Venture Capital Definition

Venture Capital Definition

Venture capital (also known as “VC” ) is a form of private equity and financing provided to newer businesses and start-ups with long-term growth potential.

This capital is provided by investment banks, individual investors, or firms specifically dedicated to venture capital investments.

The value provided by venture capitalists often extends beyond monetary form, including technical or managerial expertise, as well as their network and other resources.

Subscribe to the Finance Strategists YouTube Channel ↗

What is Venture Capital?

Venture capital has become a popular source of initial funding for companies looking to raise capital without the credit, operating history, or collateral to garner a traditional loan from a bank.

Because these projects are a high-risk, high-reward undertaking, venture capitalists often take a significant stake of the company, often along with a leading role in the activity and operations of the business.

Prior to investing, venture capitalists perform due diligence, which includes an investigation into the management team, products, history, financial statements, and business model of the venture.

The TV show “Shark Tank”is a popular example of venture capital investing.

Stages of Venture Capital Funding

There are multiple stages of venture capital funding.

The stage of funding is directly correlated to the progression and maturity of a venture—from just an idea to nearly ready for an IPO.

While amounts and rounds of funding change over time and by industry, here is a helpful list of rounds along with a typical amount raised.

  • Pre-Seed Stage/Friends and Family Round: Usually <$50k
  • Angel Investors: Usually 25k-100k
  • Seed Stage: Often $500k – $2 MM
  • Round 1/Series A: Often $2-15 MM
  • Round 2/Series B: Often $10-30 MM
  • Round 3/Series C: Often $20-50 MM
  • Mezzanine/Pre-IPO (Varies)

*Recent valuations continue to grow, particularly within the tech sector. These values are provided to give our readers a rough estimate while actual values vary greatly.

Tips to Get Started

For startup businesses, raising venture capital can be difficult especially with venture capitalists becoming more selective in their process. If you are interested to learn how to get venture capital, our financial advisor in Lincoln, NE can be a help or if you live outside the area, please visit our financial advisor page to see the list of areas we serve.

Venture Capital FAQs

VC stands for Venture Capital.
Venture capital (also known as VC) is a form of private equity and financing provided to newer businesses and start-ups with long-term growth potential.
This capital is provided by investment banks, individual investors, or firms specifically dedicated to venture capital investments.
Venture capital has become a popular source of initial funding for companies looking to raise capital without the credit, operating history, or collateral to garner a traditional loan from a bank.
While amounts and rounds of funding change over time and vary by industry, here is a helpful list of rounds along with a typical amount raised: Pre-Seed Stage/Friends and Family Round (usually <$50k); Angel Investors (usually $25k-$100 K); Seed Stage (often $500k-$2M); Round 1/Series A ($2-15M); Round 2/Series B (often $10-$30M); Round 3/Series C (often $20-$50M); Mezzanine/Pre-IPO (Varies).
True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.