What are Venture Capital Funds?
What are Venture Capital Funds?
Venture capital fund is a type of private equity fund that focuses on investing in start-up companies that are believed to have strong growth potential in the future.
Venture capital funds are usually early investors of a company which is regarded as a more risky investment. However, the potential upside of the VC investments are more lucrative than other private equity investments which compensates the risks. Aside from capital investment, VC funds involve more in the operation of target companies.
VC funds would usually provide resources such as business connections, technology support and other professional advice to grow the underlying companies.
Formation of a VC fund
The formation of a VC fund is similar to private equity funds, which involves a general partner and limited partners. A general partner is usually the investment team who manages the VC fund and makes investment decisions while limited partners are investors who commit capital only.
As investments are usually made in a very early stage, VC investments are usually long term investments ranging from five to more than ten years with IPO and M&A being its usual exit options.