What’s venture capital and why does it matter for startups?

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The term ‘venture capital is often thrown about in the tech startup world, but do you know what it means and how it works? Could you explain it to people at a dinner party?

If the answer to these questions is ‘no,’ don’t worry because Growth Quarters has you covered.

The first thing you need to know is that venture capital is a type of private equityventure capital investors put peoples‘ money into a business and in so doing get a stake in the company they’ve backed.

So as a founder or entrepreneur, if you take venture capital funding, you’ll also inevitably be giving up equity in your business depending on the amount raised.

This means the investor, or investors, will own a stake in your company, have a say in the business, and will often get a seat on your board.

Venture capital is usually provided to startups showing long-term growth potential or those with a good track record.

Where does the money come from?

A venture capital fund is a pooled investment vehicle. This means that the money deployed by a VC firm typically comes from institutional investors, corporations, or wealthy individuals.

Investing in startups is risky. In fact, it’s sometimes estimated that three out of every four venture-backed startups fail, so a VC has to make sure that those that do succeed cover the losses of those that fail.

Venture capital investors spend other peoples‘ money and as such have to deliver healthy returns to their own investors.

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