What Is Venture Capital?
The word venture suggests that this type ol capital in¬volves a degree of risk and even something of a gam¬ble. Specifically, "The venture capital industry sup¬plies capital and other resources to entrepreneurs in business with high growth potential in hopes of achieving a high rate of return on invested funds."12 The whole investing process involves manv stages, which are represented in Exhibit 14.3. Throughout the investing process, venture capital firms seek to add value in several ways: identifying and evaluating busi¬ness opportunities, including management, entiy. or growth strategies; negotiating and closing the invest ment; tracking and coaching (lie company; providing technical and management assistance; and attracting additional capital, directors, management, suppliers, and other key stakeholders and resources. The process begins with the conception of a target investment op¬portunity or class of opportunities, which leads to a written proposal or prospectus to raise a venture cap¬ital fund. Once the monev is raised, the value creation process moves from generating deals to crafting and executing harvest strategies and back to raising an¬other fund. The process usually takes up to 10 years to unfold, but exceptions in both directions often occur.