Venture Capital
What venture capital firms fund, how a VC round works, and how to get your company in front of them.
A venture capital (VC) firm manages a fund raised from outside investors such as pension funds, endowments and wealthy families, and invests it in young companies that could grow very large. In return the fund takes equity, and usually some say in how the company is run.
Because a few big winners have to pay for many losses, VC firms look for businesses that can grow many times over within five to ten years. That makes venture capital a good fit for some companies and the wrong fit for many others.
- Investor types
- Private Venture Capital Firm (3,344), Venture Development Firm (43)
- Top locations
- California (654), New York (239), Massachusetts (144), Ontario (76), Texas (75)
- Stages funded
- Early Stage (3,010), Startup (2,735), Seed (2,565), Expansion (1,395)
What VC firms look for
- A large market, so the company can become very big if it works
- A product with an edge competitors cannot copy easily: technology, data, network effects or a brand
- A strong team that has shown it can execute
- Traction that is growing quickly, often month over month
- A round size and use of funds that fit the firm's stage and typical cheque
How a VC round works
A firm that wants to invest issues a term sheet setting out the valuation, the amount, board seats and investor rights such as liquidation preferences. After due diligence on the business, its finances and its legal set-up, the round closes and the money arrives. The whole process often takes two to four months.
Read terms like liquidation preference, anti-dilution, pro-rata rights and board control carefully with a lawyer. They matter as much as the valuation.
Is venture capital right for you?
If your business can be very profitable without growing tenfold, angel investors, private equity, revenue-based financing or loans may suit you better and let you keep more control.
Frequently asked questions
How do I contact venture capital firms?
A warm introduction from someone the firm trusts works best. Otherwise send a short, specific email to a partner who invests in your sector and stage. On PitchStreet you can browse firms by focus and post your pitch so they can find you.
How much equity do VC firms take?
It varies by round and valuation. Early rounds commonly sell somewhere around 10% to 25% of the company, but every deal is negotiated.
What stage do VC firms invest in?
Some funds back seed-stage companies, most focus on early stage (Series A and B), and some only invest in later, larger rounds. Check a firm's stated stage before you reach out.
Is PitchStreet a venture capital firm?
No. PitchStreet is a network where companies raising money and the people and firms with capital find each other. Deals are agreed directly between them.
Related guides
This guide is general information, not investment, legal or tax advice. Directory figures update automatically. PitchStreet is a network that connects people who need capital with people who have it; it is not a lender, broker or investment adviser.