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Funding Basics - micro VCs and VCs

Posted by Health Entrepreneur 02/01/2016

In the previous article we have discussed about the basics of angel investing and now we move on to understand how micro VCs and VCs work for funding. Lets get into the details.

Abstract:

After understanding the basics of 'angel investing', we move on to understand how micro VCs and VCs work. We also look into the processes involved and some of the prominent firms in the US recently. According to market analytics, the number of healthcare startups has increased by 68% in 2015. This time is regarded as the “Golden Era” of Healthcare startups with Venture capitalists interested to venture in the healthcare sector and reduced initial investment requirement due to cutting edge technology. However, out of 1000 startups only 8 of them can grow big.

 

At a Glance

  1. Micro venture capital

  2. Venture capital

  3. Venture Capital Firms- The Top Players

  4. VC Investment in Health-care in the year 2015

  5. The Process of VC Funding

 

Introduction

Funds are the lifeline of any business. The journey of any new business starts with a great idea and radically passes through several phases of the business cycle. Transition from one phase to another is facilitated by funding generated through various means. These include bootstrapping, equity crowdfunding, angel investors, micro VC’s and Venture capitalists.

In this article, we focus on micro VC’s and Venture Capitalists

 

Figure: Stages of funding in business lifecycle

C:\Users\asesh\Desktop\Project_Article\Final\funding-odyssey\funding-odyssey_05.jpg

 

In a typical business lifecycle, the founder bootstraps the idea with prototype and rolls out the product by generating revenues through angel funding and seeks venture capitalists for future expansion and growth.

 

Micro Venture Capital

Micro VCs are the minor venture firms that principally invest in the seed stage of startup companies that are unable to magnetize the traditional venture capitalist investment. The most common problem faced by any startup is entering into a new market or creating the new market, and the Micro-VCs are much more lenient to these companies and are ready to bear the risks.

 General characteristics of Micro VC firms:
  • Predominantly invest at the seed stage

  • Investment on behalf of 3rd party partners

  • Fund limit $50million

Nowadays, due to modern technological inventions like Cloud and SaaS, the offsetting a new startup is getting straight forward, and micro venture capitalists are playing an important role in providing the much-needed capital. As a result, the Micro-VC’s are gaining much more profit by investing in the next great idea.

 

Venture Capital

Venture capital is a smart investment which financially backs startup firms and small business which are anticipated to have potential for growth but do not have passage to the capital markets. Venture capital according to business language also termed as the “risk capital” may lead to a share of equity, profits, and even some management role.

Some facts about venture capitalists

  • Venture capitalists take the high risk but have the chance to reap greater returns.

  • Venture capitalists are private funders like an affluent independent capitalist or even investment banks.

  • Venture capitalists not only invest in startups, but they also help companies in expansion or even recovery of bankrupt companies.

  • Venture capitalists provide wholesome money as well as help to acquire prestige, because if you can get backing from a venture capitalist that means your business or idea has a great amount of potential for breakneck growth.

  • Venture capitalists invest in the companies that they expect to go big either by going public or merge with larger firms.

 

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