Get to know Venture Capital, an uncommon ‘Premium Cushion’ for Startups

Behind every big company, including Google before it became the Google we know today, Meta or Facebook before it became such a great company, and many more around the world,

They could once be a small startup in a small room or started from a garage before it became so successful that it became a multimillion-dollar corporation. They’re all backed by a VC group, or an investor group called Venture Capital.

Today, ACU PAY would like to introduce Venture Capital to you. Let’s see who they are and how it works.

Who are they?

Venture capital (VC) is a form of fundraising by companies or funds for early start-ups and emerging companies that are considered to have high growth potential.

Venture capital invests in these early stages in exchange for shares or ownership partners. Venture capital investors take the risk of raising capital for startups in hopes that some of the companies they support will succeed, but VC investment has a very high failure rate. This is because early start-ups are faced with high uncertainty due to a variety of factors.

The support for Startups

VC investment not only provides funding but also plays an important role in supporting startups in many ways.

Financing: VC investment allows startups to expand, develop products, and reach new markets without relying on other funding sources that may impose stringent conditions.
Counseling and Guidelines: VC investors often have experience in the industries they invest in, so they can give strategic, management, and business planning recommendations.
Networking: VC investments provide startups with access to critical networks, whether they are customers, distributors, or business partners, that are important to growing and expanding their markets.
Access to the Capital Market: Having VC investors can increase the creditworthiness of startups, which may help them raise additional capital or enter the stock market in the future.

Share Control within the Company

By exchanging large shares to receive large capital from investors or joint ventures, some of the control over the company is lost. Joint venture investors can strengthen their businesses by helping them operate. At the same time, joint venture investors may influence the future in ways that start-ups do not always agree with.

In general, negotiations with VC offer a 20% to 50% stake in startups, which is already a significant proportion of ownership. Crunchbase’s analysis shows that by the time venture capitalists leave the business, ownership will be 53% on average, some companies in the study had significantly higher VC ownership, such as Etsy (62%) TrueCar (82%), and Sabre (97%).

Venture Capital's Mechanism

VC Operations consists of these key steps:

Fundraising: VC fund starts with fundraising by individuals, banks, insurance companies, or financial institutions. This fundraising is used to fund startups.
Selection and Investment: VC investors select companies with high growth potential based on business models, teams, target markets, and competitive analysis. Investments are usually made in the form of stock or debenture purchases.
Management and Development: After the investment, VC investors will play a role in helping the company grow by providing advice, network connections, and strategic support.
Exit: Exiting an investment is an important step for VC investors to gain returns. Exiting an investment can be done by selling shares on the Stock Exchange (IPO), selling to other companies (M&A), or selling shares to other investors.
A Return Assessment: When an investment exit occurs, VC investors will evaluate the return on investment, which will help them make their next investment decision.

Venture Capital is an important mechanism for supporting new business growth, which includes the financing and strategic assistance needed for those businesses’ growth, or even building connections and helping startups grow and achieve their goals. The work of VC ranges from funding, selection and investment, management, exiting investment, and evaluating returns, all of which provide startups with the opportunity to grow and succeed in the markets they want.

References from
en.wikipedia / hbr.org / svb / hubspot / workpointtoday / investmentcouncil / linkedin