What is Venture Capital
Venture capital has experienced a boom over the past decade.
Fueled by billion-dollar exits, the explosion of Silicon Valley startups, and massive raises from SoftBank’s $100B Vision Fund, annual capital invested worldwide increased by nearly 13x from 2010 to 2019 to reach over $160B. Meanwhile, mega-rounds (investments of $100M+) nearly tripled from 2016 to 2018.
However, the economic downturn brought on by Covid-19 has to some extent put the brakes on that growth. Fewer VCs are investing in seed-stage startups, and March 2020 saw a 22% year-over-year (YoY) decline in overall VC deals in the US.
It’s likely that VCs are being more selective in their investments, preferring more established companies that have proven themselves to be strong enough to weather the pandemic and grow when the economy ramps back up.
But venture capital is in many ways resistant to short-term changes, due to the simple fact that venture investments are long-term. VCs aren’t necessarily looking to invest in startups that will see huge growth in the immediate future; they are looking for ones that will grow into something extraordinary 10 years from now.
Overall, the fundamentals of venture capital haven’t changed. VCs place their bets on startups poised to jump-start a fundamental change in consumer or business behavior — and this fact is no different now than it was when the industry began.
In this report, we explore the foundations of venture capital by diving into its key terms and definitions, the motivations and thought processes of VCs, and what VCs — and startups — look for at each investment stage.
Read the full report
