The Venture Capital investment process aims to benefit economically both the startup companies and the investors.
This process is also known as risk capital since it involves investors who are willing to take risks in companies that have not yet been tested in the market, in the hope of obtaining great benefits in the future.
An example of this type of project is Adapt, a Venture Capital firm focused on investing in innovative early-stage companies in the United States and in the Latin American region. This company belongs to the GK Technology business unit, which is one of the most influential groups in the region.
Stages of the Venture Capital investment process
The Venture Capital process is broken down into different stages:
This is one of the most important stages since at this time the organization that is interested in providing Venture Capital must focus its efforts and resources on seeking investments and monetary funds. This stage lasts between 6 months and a year.
- Search for recipients for investments
Once they have the necessary sources of investment, it is necessary to search the market for the right companies in which they can invest that money, which must have an innovative product or service and a solid leadership team. This stage usually lasts up to 5 years.
- Investment commitment
Through this stage, which lasts between 3 and 5 years, the organization decides which are the companies in which it is going to invest and how much money will be allocated to each of them. This may even involve reviewing the companies’ financial statements, examining the leadership team’s track record, and evaluating the potential growth of the target market.
- Investment management
At this stage, the entity in charge of investing the money is in charge of providing advice and recommendations to the small companies in which it has been invested, so that they have progressive growth. In addition to guidance and advice, equity investors also offer additional resources such as industry contacts and experience. This is where they begin to see the first fruits of investment regarding money generation.
- Liquidation of the fund
As the company grows, venture capital investors may also play a role in the exit of the investment. This may involve selling their shares in an initial public offering (IPO), selling their stake in the company to another investor, or conducting a fund liquidation where the mutual fund is closed, an analysis is performed on the results that were obtained, and the money obtained is distributed among the partners.
The venture capital process can be beneficial for both investors and the companies in which they invest. Investors can reap huge returns if a company is successful, while start-ups can gain the capital and experience needed to grow and succeed in the marketplace.