VC firms or Venture Capital firms have existed from the time startups required seed capital to get the funding support. These organizations are identified to support business at many stages. VC firms contain a set of companies that are willing to offer money to startups which are all set to get into the market. Earlier, VC firms have supported several startups that we know now as one of the biggest players in their industry. Still, the question of how VC firms help in startup funding remains unanswered. In this guide, I will throw some light on how VC firms can help you in your startup funding.
How VC Firms Can Help You
Two key aspects play a crucial role when it comes to VC firms funding your startup. The two key aspects are limited and general partners. General partners are the individuals who are involved in managing communication between startups and investors. They are responsible for initiating and making terms and agreements successful among both of them. Limited partners are all the investors or investment bodies that will provide money in the form of seed capital to the startups. However, the organizations offering seed capital could or couldn’t be the partner of VC firms. This makes VC firms unique from other types of investors.
On the other hand, startups should be able to convince VC firms to offer money to them. Startups should have certain qualities that make them appear as a golden choice of investment. VC firms are very good at making profitable investments in these startups. Due to such ability, they are able to profit both the limited partners and startups.
How Venture Capitalists Earn Money
These organizations could have a vast amount of money to make startups successful. There are two ways by which VC firms can make money.
- Management fees- The management of startup assets by the professionals could have some expense. This expense comes under the management fees. The management fees are paid at 2 to 3 percent of capital gained from VC firms.
- Carry- Carry is defined as the profit or share given to the investors after the investment is made successfully. Lots of money is earned by Venture capitalists with these profits.
Influence of VC Firms On Startups
Startups have always benefited by taking help from VC firms. I also mentioned before that some of the tech startups emerged as global players in the market. The general partners could be professionals that are ready to help startups with other resources besides seeking VC funding. These professionals generally have a network that could include other successful entrepreneurs and angel investors. Startups should also know that VC firms have a life span of 10 years. After that, they will try to look for the exit plan. However, these organizations could help startups indirectly. VC firms are a lot busy while seeking other better investment opportunities.
List Of Top VC Firms
After you have understood how VC firms help startups, it’s good to know about some of the best VC firms operating around the world.
- Accel– It is an organization that is active from the very beginning. The firm has supported companies such as Facebook, Braintree, and Dropbox. Accel is an expert in understanding the strengths and weaknesses of the entrepreneurs.
- Andreessen Horowitz- It is a VC firm which is located in Silicon Valley. This organization has invested in OfferUp, Everlaw, Allset, and so on.
- Benchmark- It is a VC firm that is mostly interested in tech startups. Some of the startups it has supported are Digits, Docker, and Modern Treasury.
- Index Ventures- This VC firm has shown interest in technology and biotechnology. Some of the startups it has invested in are Fast.co, Collibra, Double, and so on.
- Sequoia Capital- This VC firm has its offices in several major countries. It has helped startups like Tecton.AI, Knowde, Limbix, Robinhood, etc.
- Bessemer Venture Partners– Bessemer is located in New York. This VC firm has invested in Okera, Shippo, and Axonius.
- Founders Fund- This organization is located in San Francisco. It has invested in PsiQ, Motherly, and SpaceX.
- GSV Capital- GSV Capital has mainly focused on China and the U.S.A. The VC firm has invested in Coder, EOI Technology, and Frubana.
To Sum Up
Until now, you would have known how VC firms can help you in startup funding. You should always approach them, as these organizations are always available to provide funding for new startup companies. If you have a better business plan, investors will always come to support you. VC firms have the power to make your startup a successful player in the market. However, care should be taken while agreeing with the terms and conditions. Don’t allow investors to take a larger percentage of stake in your organization. You can play safe by clearing all the doubts from the very beginning. Doing this will always be beneficial for your startup at the present and in the future.