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Venture Capital 101: The 5 Key Steps
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1 Fundraising
This is where venture firms secure capital from Limited Partners (LPs)—think institutional investors, family offices, and high-net-worth individuals. The goal? To pool enough resources for future startup investments.
2 Investing
After raising a fund, VCs scout for promising startups. They evaluate a company’s team, market potential, product viability, and growth strategy to decide whether to invest.
3 Monitoring
Once invested, VCs don’t just sit back. They often take board seats or advisory roles, providing strategic guidance, introductions to industry networks, and support for future fundraising rounds.
4 Exit
When the startup scales and matures, VCs look to realize returns. Common exit strategies include IPOs (Initial Public Offerings) and M&A (mergers or acquisitions). Timing is crucial to maximize value.
5 Distribution
After a successful exit, the venture firm returns profits to LPs. These gains validate the VC’s efforts and performance, and set the stage for raising future funds.
Understanding these steps can help founders and investors alike see where their focus should be in the startup and investment lifecycle.
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