In practice
Startups raise venture money in rounds, from seed through Series A, B and later, each at a new valuation. Investors often take a board seat and give advice as well as cash, and a fund usually runs about ten to twelve years, sometimes extended. Gains come when a company is bought or lists on a stock market, which can take many years, and many startups fail and return little or nothing.
An example
Round numbers, not a real fundSay a venture fund puts $2 million into a startup for 20% of it. If no later round shrinks that stake and the company is bought for $100 million, the fund’s 20% is worth $20 million, ten times what it paid. Simple example. Terms vary by fund.
Why it matters
Most venture returns come from a handful of very large winners, so a venture fund’s results usually depend on whether it backs one of those companies.
In the news
Recent stories that use the term- Conservation Resources Launches Forest VC Fund CRSilva Ventures with $5M Commitment from U.S. Endowment
- Ex-Hummingbird investor plots new VC firm, sources say
- Ondine Capital Announces First Close of Fund III to Drive AI and Semiconductor Innovation
- Venture builder NeoSci Ventures raises S$70 million for inaugural biotech fund
- Cabinet approves Rs 10,000 crore Startup India Fund of Funds 2.0 to boost venture capital ecosystem
- Midwest University Inks Commitments With New PE, VC Funds
A definition, not advice; where usage varies the entry says so.
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