![]() ![]() The technology firms of Silicon Valley and Menlo Park were primarily funded by venture capital. These characteristics usually best fit companies in high-tech industries, which explains the venture capital boom of the late 1990s. The priority for VC firms is high financial return and a successful exit within three to seven years.Venture funding is most suitable for businesses having large up-front capital requirements that cannot be financed by debt or other alternatives. Growth potential is the most important quality, given the high risk a VC firm assumes by investing. Innovative technology, growth potential and a well-developed business model are among the qualities they look for. Venture capitalists are selective in their investments. Venture capitalists are gambling that returns from successful investments will outweigh investments lost in failed ventures. ![]() This way, investors are diversifying their portfolio and spreading out risk. Investors combine their financial contributions into one fund, which is then used to invest in a number of companies. Unfortunately for Facebook's venture capitalist investors (Accel Partners, Greylock Partners and Meritech Capital), the IPO has not performed as well as expected.ĭue to their risky nature, most venture capital investments are done with pooled investment vehicles. The Menlo Park-based firm has seen immense success since their launch in 2004. Venture capital funds revolutionary social networking servicesįacebook is one example of a entrepreneurial idea that benefited from venture capital financing. ![]()
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