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What You Need to Know About Venture Capitalists

Last updated: August 30, 2022
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Venture capitalists and venture capital firms are one of the best ways for a start-up company to experience exponential growth. The capital from venture capitalists is typically enough for small companies to expand into new markets, hire more staff, and develop new products. However, connecting with venture capitalists and getting funding is not always easy.


To make the process simple, it’s always best to know what or who you’re dealing with. We’re going to take you through everything you need to know about venture capitalists to help you understand venture capital and its purposes. Read on to learn more below.


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    What is Venture Capital (VC)?

    Venture capital is a type of private equity. Firms that offer venture capital are venture capitalist firms and they commonly invest in start-ups and small businesses. Venture capital is invested into these business ventures because they’re believed to have a high rate of long-term growth.


    Venture capital often comes from large firms and big investors; people who are well-off enough to invest in risky ventures like small businesses and start-up companies. Some common sources of venture capital include banks, individual investors who pool their money, investment firms, and other types of financial institutions.


    What is the History of Venture Capital?

    Venture capital has been around for longer than many people think. The idea of venture capital has been floated around since the 1800s because it’s a type of private equity.


    Still, venture capital never became popular until after World War II. It became popular when George Doroit began the American Research and Development Corporation in 1946. The corporation invested in companies that were believed to have long-term growth, which is why Doriot is referred to as the first venture capitalist.


    What is the Purpose of Venture Capital?

    While the purpose of venture capital is to make more money, it’s not as simple as that. Instead of earning money back, many venture capital firms invest in companies for a percentage of ownership. Typically, venture capital firms try to bargain for 25% to 50% of ownership in a start-up.


    Venture capital firms take this route because they gain more control in the decisions of a company, which makes it more profitable.


    What is a Venture Capitalist?

    A venture capitalist is a private equity investor who invests on behalf of banks and other financial institutions.


    Venture capitalists provide capital for start-up companies and support small businesses that have a high potential for long-term growth. In most cases, venture capitalists invest for an equity stake in the company.


    When do Venture Capitalists Invest in Startups?

    Venture capitalists don’t invest in start-ups until the risk is worth the reward. Therefore, most venture capitalists wait until the Series A round of funding or the Series B round of funding to invest. Some venture capitalists will invest during the seed round but only if the idea is strong enough.

    How Much Do Venture Capitalists Invest in Startups?

    Venture capitalists invest a lot of money into start-up companies. This is because venture capital firms invest during the later rounds of funding. Typically, venture capital firms invest between $2 million and $100 million into start-up companies


    What’s the Difference Between Venture Capitalists and Angel Investors?

    Angel investors and venture capitalists are similar but there are a few key differences. First and foremost, venture capitalists typically invest in start-ups that have a concrete business plan and need help with growth. Another difference is that venture capitalists typically invest more money and the money is invested through a firm.


    That said, the main difference between venture capitalists and angel investors boils down to venture capitalists being firms, whereas angel investors are independent.


    What are Some of the Best Venture Capital Firms?

    Several Venture capital firms exist but they’re not all equal. Because some venture capital firms are better than others, it’s important to learn which firms are the best. We’ll take you through the top five best venture capital firms below.

    • Sequoia Capital
    • Accel
    • Andreessen Horowitz
    • Insight Partners
    • Index Ventures

    Sequoia Capital

    Sequoia Capital is a well-rounded firm. It’s been around since 1972 and has made more than 1,700 investments as of 2022. What’s more, Sequoia Capital has an exit ratio that hangs around 21%, which is better than most competitors.


    Sequoia Capital frequently invests in technology companies. In fact, it’s one of the largest venture capital firms today because of its investments in start-ups like YouTube, Google and PayPal. Today, the firm also invests in fintech companies like crypto exchanges.


    Accel

    Accel was founded as Accel partners in 1983. It’s an American venture capital firm that focuses on early-stage and late-stage start-ups. Over the years, Accel maintains a steady exit ratio of just under 20%. Only a few companies like Sequoia Capital and Index Ventures have higher ratios.


    While Accel isn’t as large as some of the other venture capital firms, it has experience with taking companies all of the way. For example, the firm has been involved in 8 IPOs. Plus, Accel used to be a part of Krux and Braintree.


    Andreessen Horowitz (AH)

    Marc Andreessen and Ben Horowitz are the founders of Andreessen Horowitz. The firm began in 2009 and continues to invest in start-ups across the country. The firm prefers to invest in start-ups within the e-commerce and gaming industries but there’s also a focus on social media and cloud computing.


    As of 2022, the firm maintains an investment to exit ratio that’s just under 17%. Some notable companies that AH invests in include Twitter ($80 million), Facebook, and Stripe. AH also takes risks and invests in early-stage start-ups like Skype (at the time), which sold for billions of dollars.


    Insight Partners

    Insight Partners is a private equity firm with locations in New York and across the United States. Jerry Murdock and Jeff Horing are the founders of the company and it was opened in 1995. As of 2022, the firm maintains an investment to exit ratio above 22%.


    The goal of Insight Partners is to invest in early-stage start-ups that are about to see growth. Some examples include Shopify, DeliveryHero, Salesloft, and more. Today, the firm has made more than 700 investments.


    Index Ventures

    Index Ventures was founded in 1996 and got its start as a European company. While Index Ventures got its start in Europe, the company now has two headquarters in San Francisco and London. Index Ventures is known for investing in gaming, e-commerce, security, and fintech.


    Some of the most notable start-ups that Index Ventures has a hand in are Facebook, CodeAcademy, Dropbox, and more. Index Ventures is also known for making successful exists and has existed from more than 200 companies with an exit ration above 20%.


    How Do You Connect with Venture Capitalists?

    It’s never easy to connect with investors. Fortunately, AngelMatch makes connecting with investors straightforward. You don’t need a network and you don’t have to build one because platforms like AngelMatch create the network for you.


    AngelMatch is the best place to connect with investors because it’s a database that’s full of venture capitalists, angel investors, and other types of investment options. Plus, it’s completely free to start.


    Still, there are several other options that will help you connect with investors. Feel free to try social media, in-person meetings, and more. Some start-ups even have luck when they send proposals directly.


    Connect with Venture Capitalists Today

    When you have access to a database that contains thousands of venture capitalists, it’s easy to make connections. AngelMatch focuses on connecting investors with start-ups and without the hassle of navigating social networks. Furthermore, you don’t need a network and there’s no need to attend networking events.


    With AngelMatch, all you need is an idea. Let us take that idea and help you turn it into a reality today. Give our database a try and start connecting with investors today.