Entrepreneurs and Venture Capital
[Stanford University]: Entrepreneurs have important roles in creating new businesses that fuel progress in societies worldwide. The entrepreneur uses innovation and technology to foster positive impact and activity in all facets of life. The capable entrepreneur learns to identify, select, describe, and communicate the essence of an opportunity that has attractive potential to become a successful venture. The entrepreneur is able to describe the valuable contributions of a venture and create the design of a business model that can be sustained by a competitive advantage. The venture team creates a road map (strategy) that can, with good chance, effectively lead to the commercialization of the new product or service in the marketplace with a sustainable competitive advantage.
Startup (or Startup Company)
What is a startup? There's
no definition any two entrepreneurs or investors agree on. Most say a
startup is determined by its age, growth, revenue, profitability or
stability. The definition of a startup is likely to exclude entities formed by
splitting or restructuring businesses or those that have been in
existence for five years and exceed certain dollars in sales. Apart from innovation, such startups have to be engaged in the
development, deployment or commercialisation of new products, processes
or services driven by technology or intellectual property.
- [Investopedia]: A company that is in the first stage of its operations. These companies are often initially bank rolled by their entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand. Due to limited revenue or high costs, most of these small scale operations are not sustainable in the long term without additional funding from venture capitalists.
- [Wikipedia]: A startup company or startup or start-up is an
entrepreneurial venture or a new business in the form of a company, a
partnership or temporary organization designed to search for a
repeatable and scalable business model. These companies, generally newly created,
are innovative in a process of development, validation and research for
[Investopedia]: Venture Capital (VC): Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.
Venture capital can also include managerial and technical expertise. Most venture capital comes from a group of wealthy investors, investment banks and other financial institutions that pool such investments or partnerships. This form of raising capital is popular among new companies or ventures with limited operating history, which cannot raise funds by issuing debt. The downside for entrepreneurs is that venture capitalists usually get a say in company decisions, in addition to a portion of the equity.
The Segmentation of the Venture Industry
Today, the venture capital industry has become increasingly specialized. It is going through a segmentation process. Some of this segmentation has been by industry (IT, energy, healthcare, etc.) and sub-industry (iPhone apps, financial tech, etc). But more obvious, especially lately, has been the segmentation by company stage. In general, venture financing is breaking into following four segments: Incubators, Angels, VC, and Late Stage Funds.
In the past, traditional VC’s played all of of these roles. They incubated companies, provided small seed financing, and in some cases provided later stage liquidity. But mostly the mentorship and angel investing roles were played by entrepreneurs who had expertise but shallow pockets and limited time and infrastructure.
A true venture partner provides more than money, but mentorship, counseling and strategic advice that can elevate start-up firms and small businesses to new heights.
[More to come ...]