The Venture Capital Industry

Overview: The article gives a brief overview of the venture capital industry. Venture capital is money provided by professionals who invest alongside management in young, rapidly growing companies that have the potential to develop into significant economic contributors. Venture capital is an important source of equity for start-up companies. Professionally managed venture capital firms generally are private partnerships or closely-held corporations funded by private and public pension funds, endowment funds, foundations, corporations, wealthy individuals, foreign investors, and the venture capitalists themselves. The typical person-on-the-street depiction of a venture capitalist is that of a wealthy financier who wants to fund start-up companies. Venture capitalists may be generalist or specialist investors depending on their investment strategy. Alternatively, they may be specialists in one or two industry sectors, or may seek to invest in only a localized geographic area. The process that venture firms go through in seeking investment commitments from investors is typically called "fund raising." The investment by venture funds into investee portfolio companies is called "disbursements". As an investment manager, the general partner will typically charge a management fee to cover the costs of managing the committed capital.

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Format: HTML | Date: Jan 2003 | Pages: 1