📔How VCs operate

Venture Capital firms typically source their funding from large investment institutions like superannuation funds or banks.

• Typical investments are up to a period of 10 years

• To compensate for long-term commitment/risk investors expect very high returns on investments

• VCs invest in projects with high growth potential or companies which have the ability to quickly generate cash flow

• VCs exit investment through company listing on the stock exchange, selling to a trade buyer or a management buyout

Income:

• Venture Capitalists receive a return on their investment through fees

• Some return through dividends

• Largest return through selling their shares in a company (capital gains)

Investment process

• Initial review of proposals from a startup

• Preliminary screening (pitch)

• Negotiating investment (contract)

• Approving the investment (equity company, ongoing support, may receive dividends)

• Sale (selling equity in the company)

How Venture Capitalists work https://www.aic.co/AIC/Investment/How-does-venture-capital-work.aspx