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Key Takeaways
Venture capital (VC) is a type of financing that provides funding to start-up companies that have potential for high growth and significant value creation. VC fund managers are focused on funding early-stage innovation and are a key financing source in helping businesses that are starting to commercialize a new product or service.
VC firms raise money from institutional and accredited investors and pool that capital into a fund. From there, the venture process typically includes:
Startups raise money at different stages of their growth. Each stage comes with its own level of risk, return potential, and investment size.
| Strategy | What It Means |
| Seed | Initial funding to explore an idea, conduct research, or develop a prototype. Companies are often pre-revenue and pre-product. |
| Early Stage (Series A/B) | Capital to build products, grow teams, and acquire early customers. Business models are still early with limited financial history. |
| Late Stage | Funding for companies with proven products, established product-market fit, and strong revenue growth. Companies are usually focused on scaling, market expansion, and preparing for exit opportunities. |
| Venture Growth | Investments in mature, fast-growing companies generating revenue and nearing profitability, but still seeking capital to expand. |
Implementation Insight: Venture capital can be a strategic allocation for investors seeking exposure to innovation and long-term capital appreciation—particularly those comfortable with higher risk and longer time horizons.
Implementation Insight: Because venture capital returns are often driven by a few standout investments, manager selection is critical.
| Myth | Fact |
| Venture capital is only for Silicon Valley | VC is global—it is a growing, global ecosystem. |
| All VCs are the same | VC returns have historically seen wide dispersion between top-quartile and all other funds. Manager selection is critical. |
| Anyone can invest in VC | Access to high-quality funds is challenging and VC managers can be disciplined on limiting fund size. |
| It’s only for billion-dollar ideas | While VCs seek big returns, many back companies aiming for strong exits under $1B. |
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