Venture capital funding is a form of private equity investment where a business obtains long-term funding in exchange for a share of its equity.
Venture capital funding is mainly used by start-ups or new businesses with high growth potential, ie technology start-ups. Businesses can also use it to expand, fund management buy-outs or buy-ins, or develop new products.
There are four main types of private equity funds:
You should research what type of private equity funding your business needs. Different types of investment are suitable for different stages of business development:
You may be refused venture capital finance because you haven’t made sure that you are ‘investment ready’ before approaching potential investors. For more information, see Getting ready for funding.
Investors will want to know if there will be an exit opportunity and that they can recover their investment and make a profit. You should be able to tell them about your business’ long-term plans and ambitions.
Choosing the right venture capital firm will increase your chances of success. You should consider:
You can use the British Private Equity and Venture Capital Association (BVCA) membership directory to find venture capital investors. However, you will need to subscribe to get access.