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- Venture capital (VC) firms exchange cash for equity or equity-like securities.
- Venture capital funding most often occurs in the early to middle stages of a company, before an acquisition or an initial public offering. Typically, VC firms make a relatively large investment, ranging from 1 to 30 million dollars, though in more recent years, “micro-VCs” that write smaller checks have become more common. Often, a company will raise money from several venture capital firms, either simultaneously or in subsequent transactions.
- Investors expect a 3–10x+ return on investment for any given investment, depending on the stage of the company at the time of investment.
- Venture capital firms may protect themselves by retaining the right to invest in the future, by protecting their equity from dilution, and through special voting rights including blocking rights on certain corporate actions and often through representation on the Board of Directors.
- Venture capital investment term sheets typically set a new valuation of the company.
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Stein, Elliot and Topche, Brett
"Seeking Venture Capital Investment,"
Academic Entrepreneurship for Medical and Health Scientists: Vol. 1:
2, Article 6.
Available at: https://repository.upenn.edu/ace/vol1/iss2/6