Venture capital (VC)

Professional investors who manage a fund of other people's money and invest it in high-growth startups in exchange for equity.

Example

A $150M fund making 30 investments over four years.

Important

A VC is not a person with a pile of their own money. They have their own investors to answer to, which explains almost everything about how they behave.

Related terms

• Limited partner (LP) — The investors IN a venture fund — pension funds, endowments, family offices, wealthy individuals.
• General partner (GP) — The people who run a venture fund, make the investment decisions and sit on boards.
• Fund — A pool of committed capital with a fixed life — typically ten years — that a VC invests and then returns to its LPs.
• Investment thesis — The specific kinds of company a fund has told its LPs it will invest in — sector, stage, geography, cheque size.

Lessons that explain it

• Should you raise money at all? — Raising is not an achievement, it is a transaction. The first question is whether you need it, and most founders skip it. (12 min)
• The funding stages, in order — Friends and family, angels, accelerators, pre-seed, seed, Series A and beyond — what each expects and what each is for. (12 min)
• Who the investors actually are — Angels, VCs, accelerators, family offices, corporate VCs, private equity, venture debt. They want different things — pitch them differently. (12 min)
• How a VC fund actually works — A VC is not a person with money. They manage a fund with its own investors, and that single fact explains almost everything they do. (15 min)
• Venture-backed or bootstrapped? — Two completely different ways to fund a company, with different risks, different speeds and different definitions of winning. Most founders never consciously choose. (12 min)

All 176 terms in the Founder glossary