Ever wondered how Venture Capital works? Well, we are here to shed some light on the process that defines Venture Capital.
๐. ๐๐๐ฉ๐ข๐ญ๐๐ฅ ๐๐๐๐ฎ๐ฆ๐ฎ๐ฅ๐๐ญ๐ข๐จ๐ง โ Venture Capitalists (VCs) amass funds from Limited Partners (LPs) to create a substantial capital pool.
๐. ๐๐ญ๐ซ๐๐ญ๐๐ ๐ข๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ โ VCs primarily channel these funds into nascent, high-growth potential companies that require capital infusion for expansion.
๐. ๐๐ฎ๐ซ๐ญ๐ฎ๐ซ๐ข๐ง๐ ๐๐ซ๐จ๐ฐ๐ญ๐ก โ VCs donโt just provide capital; they actively participate in the companyโs growth. They often take up board seats, offer strategic advice, and make valuable introductions, thereby serving as advisors and mentors.
๐. ๐๐ญ๐ซ๐๐ญ๐๐ ๐ข๐ ๐๐ฑ๐ข๐ญ โ After a period of approximately five to ten years, during which the company experiences significant growth, the VC divests its stake through an acquisition or an Initial Public Offering (IPO).
๐. ๐๐ซ๐จ๐๐ข๐ญ ๐๐๐๐ฅ๐ข๐ณ๐๐ญ๐ข๐จ๐ง โ The successful exit not only benefits the company but also allows VCs and LPs to reap substantial returns on their initial investment.
๐. ๐๐๐ฉ๐ข๐ญ๐๐ฅ ๐๐๐๐ฒ๐๐ฅ๐ข๐ง๐ โ Once all investments have been liquidated and the proceeds have been distributed to the LPs, the cycle begins anew. LPs reinvest their earnings into a fresh set of funds, thus perpetuating the venture capital lifecycle.
