What is a venture capital fund and how does it work?
At the beginning of January, we conducted a survey on whether you would like to become a part of the venture capital investments world and saw a high level of your interest. Therefore, we want to delve deeper into the topic and are launching a series of posts on venture capital investing!
In this post we will tell you why funds are created, what they are and how they work.
The answer to the first question is simple: Venture Capital Funds are created to help investors manage capital, invest only in promising projects, and make a profit. The benefits are obvious for both parties: the fund charges an asset management fee, and the investor makes a profit.
A Venture Capital Fund is a fund that invests in enterprises or projects in the early stages of development. For example, it was venture capital investments that once helped Zoom, Uber and Airbnb.
Venture Capital Investments are the most profitable investments in the world, successful venture capitalists are listed on Forbes magazine and receive multi-million dollar returns.
For example, the first investment in Google was only $100,000, Facebook was $500,000, and Apple was $150,000.
Today even the smallest shares of these companies are worth tens of millions of dollars.
The current capitalizations of Apple and Google exceeds a trillion dollars, and the capitalization of Facebook is $923 billion.
The classic scheme of a Venture Capital Fund is as follows:
The fund invests in ten companies.
Three companies die in the first year.
Three more companies die in the second year.
Two companies show mediocre growth.
And two more companies take off, increasing the investments by tens or hundreds of times.
Therefore, venture capital investments, despite the obvious risks, generate significant returns!
However, only big investors with significant capital have access to investing in venture capital funds. Ordinary people do not have the opportunity to invest in promising startups at an early stage, which in our opinion is wrong. For the third year now, we have been working to ensure that everyone has this opportunity!
What else would you like to know about venture capital investments? Comment below!
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