Venture Capital
The exciting world of start-up and early-stage business ventures is often fueled by Venture Capital financing. Venture Capital is a form of private financing focusing on high-risk, high potential reward investments. Pools of private investment money for this purpose are administered by financiers known as Venture Capitalists, who screen thousands of prospects to select a lucky few for investment, aiding their launch. Venture Capital is but one form of financing among many for new ventures, such as Small Business Association loans and angel investors.
Venture Capitalists are highly-skilled executives with backgrounds in law, finance and entrepreneurship. Because their time is extremely valuable, and they are managing large sums of money for their investors, they devote most of their energies to companies that have stratospheric potential. Industry giants, like Microsoft, Apple and Genentech, relied on venture capital for their development.
Venture Capitalists tend to take an active role in managing and incubating the early-stage companies that they select for investment. This is a natural role for Venture Capitalists because they typically have past experience with dozens or even hundreds of other start-up businesses - both as managers and investors. But it is also an important part of their risk management strategy. Venture capitalists will usually insist on preferred stock to maintain management control, and enable a smooth exit. Venture Capitalists are also extremely well connected, and may provide access to marketing channels and distribution networks that are crucial to business success.
Venture Capital financing typically involves a series of investments in stages, known as "rounds" of financing. Each round is designed to control risk and provide investment reassessment in light of progress. The availability or amount of subsequent rounds may depend on whether the venture has met milestones, and other dynamic factors that could not be foreseen in round 1. The structure of initial term sheet and following contracts, including terms related to dilution of ownership and payout, are central to Venture Capital practice.
For more information concerning how the firm may be able to help, contact us at info@bbnlaw.com, or explore the additional informational links below.