Venture Capital offers exposure to fast growing businesses led by ground-breaking founders
Venture Capital funds concentrate capital on emerging and evolving sectors like clean technology or artificial intelligence, with the expectation that returns in the long-run will outweigh the risk of investing early.
Types of Venture Capital funding
Seed Capital
Startup Capital
Early Stage Capital
Expansion Capital
Late Stage Capital
Bridge Financing
Venture Capital firms continue to see strong capital inflows, and 2021 is already shaping up to be a blockbuster year
Investors allocate money to Venture Capital because the potential returns can be very high. By taking a position in nascent businesses that aim to grow exponentially, Venture Capital funds have the chance for gains that generally are not available to larger pools of capital.
Investment targets are typically in industries with the potential for accelerated growth, such as information technology, biotechnology, or the so-called ‘sharing economy.’
Investments in Venture Capital have been steadily growing, with total assets under management rising from $365 billion in 2015 to $865 billion in 2020, according to studies.
The risks and rewards of Venture Capital investments
Venture Capital funds make investments in a portfolio of early-stage companies, hoping to manage risk through diversification and gaining exposure to multiple avenues of upside optionality.
Risks
Venture Capital funds rely on a few companies to compensate for the ones that do not succeed. If this balance does not play out, returns may not be in-line with expectations. Additionally, obtaining liquidity is difficult as capital tends to be locked up for longer periods.
Rewards
Early-stage investments in businesses that have potential for strong growth can lead to attractive returns for successful funds. Venture Capital investments also provide diversification benefits as portfolios are exposed to secular growth themes that are less vulnerable to macro-economic forces.
Stay ahead of the curve
Venture capital investments offer the hunt for the next unicorn; risk management and diversification are key elements for successful strategies.
Finding alternatives with PitchBoard
Finding alternatives with PitchBoard
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