What Is Venture Capital Financing ?
Venture capital financing or funding is when a venture capitalist (VC) in the form of a company or individual provides necessary funds to a start-up company which has yet to generate a cash flow so that the start-up can grow. There are many rounds/series or stages of venture capital funding in the business life cycle. A venture capitalist may specialize in one of these kinds of funding or may offer funds for all these stages or rounds/series:
VC Rounds/Series Of Financing
- Series A Investor = the first professional investor at the start-up stage.
- Series B, C, and D Investors = middle and later stages of funding.
- Mezzanine, Late Stage, and Pre-IPO Funding = final rounds of funding.
Types Of Capital/Funds Offered
- Seed = This type of capital is sought when an individual is just starting out and has yet to create a product or organize a company. At this stage there are usually not many VC's who would offer funding and the ones that do invest often give a small amount. What would the money be used for at this early stage? Funding is usually used for adminstrative costs, market research, and creating a sample product.
- Startup = This is also a stage where funding is not common. In the startup capital stage, an individual's company will have at least one person working full-time and have created a sample product. Funding at this stage also covers hiring other principal managers, doing more market research, and finishing up the product or service so as to introduce it to the marketplace.
- Early Stage = This stage of funding often occurs at the two to three year mark into a company's existence when the venture is beginning to succeed, a team of managers is firmly in place, and sales are climbing. The purpose of VC funds at this point are to help the company increase sales to reach the break-even point, increase the venture's efficiency, or improve the productivity of the company.
- Expansion = At this point, the company is well-established and this is the time to take the venture to a higher stage of growth. Funds used at this stage involve going into new markets or place more emphasis on marketing the product or service. It is prudent to look for VC's that specialize in later stage investment.
- Late Stage = The company has now reached a high level of sales and revenue. In addition, a second-level of management has been established. VC funds may now be used for increasing the capacity to produce more products or services, further the company's marketing efforts, or increase the working capital so as to grow the venture.
If a company wants to find a partner for the purpose of either merging or being acquired, or if a venture wants to attract public funds by offering stocks, there are also VC's that specialize in Initial Public Offerings (IPO), recapitalizations, or buyouts. Types of loans used for covering the costs of going public into a mezzanine loan or bridge financing, which are short-term loans enabling the company to cover the costs of going public.
Venture Capital Financing And Loan Brokering
A loan broker is an intermediary between a borrower and a lender. He/she will locate venture capitalists that match up with the needs of the borrower. For instance, if a company is just starting out and wants to create a specific type of product, the broker will look for VC's that specialize both in the early stages of a startup company as well as in the type of product that this company wants to create or at least in the industry that the company wants to operate.
As a loan broker, depending on the amount of the capital used for funding, you can earn a high-income from closing deals involving venture capital financing. With our high-income loan broker program, you can get started as a high-income loan broker in about 10 days.
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