Institutional venture capital comes from professionally managed funds that have $1 million to $1 billion to invest in emerging growth companies. High-growth companies that are capable of reaching at least $25 million in sales in five years are very good candidates for venture capital.
Venture capital can be utilized from financing product development to expansion of a proven and profitable product or service. However, institutional venture capitalists demand significant equity in a business. The earlier the investment stage, the more equity is required to convince an institutional venture capitalist to invest. The range of funds typically available is $500,000 to $10 million.
Private Placement Offerings of this type are usually better suited for the development company in bio-technology and other high technology plays that involve high risk of total loss offset by an occasional large win for the venture capital types.
Institutional venture capitalists like to “cherry-pick” companies that meet their investment criteria. Compounding the degree of difficulty is the fact that institutional venture capital is an appropriate source of funding for a limited number of companies.
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