What kind of investors are venture capitalists?<\/b>
\n
\nVenture capitalists are professional investors who specialize in funding and
\nbuilding young, innovative enterprises. Venture capitalists are long-term
\ninvestors who take a hands-on approach with all of their investments and
\nactively work with entrepreneurial management teams in order to build great
\ncompanies.\n<\/p>\n
\nWhere do venture capitalists get their money?<\/b>
\n
\nMost venture capital firms raise their “funds’ from institutional investors,
\nsuch as pension funds, insurance companies, endowments, foundations and high
\nnet worth individuals. The investors who invest in venture capital funds are
\nreferred to as “limited partners.” Venture capitalists, who manage the fund,
\nare referred to as “general partners.” The general partners have a fiduciary
\nresponsibility to their limited partners.\n<\/p>\n
\nWhat makes a good venture capitalist? <\/b>
\n
\nManagement backgrounds and networks in specific industries, financial
\nskills, “people skills”, negotiating skills, statesmanship, and boundless
\nenergy are some of the prerequisites of a good venture capitalist. But all
\nthat’s not enough, because at its core, venture capital is truly an
\napprenticeship business. It takes years of mentoring to learn how to assess
\ninvestment opportunities, set pricing and strategy, build and motivate
\nmanagement teams, deal with inevitable and unpredictable threats to the
\nbusinesses, source additional capital and strategic partners, and, finally,
\ndivest (for better or worse) these illiquid investments. The good ones view
\nit as a calling, not a career.\n<\/p>\n
\nHow are venture funds structured?<\/b>
\n
\nVenture Funds are usually organized as limited partnerships where the
\ninvestors are limited partners, and the managers are the general partners.
\nThe majority of funds range in size from $5 Million to $100 Million, and
\nhave between 2 and 5 GP’s. These partnerships generally have a five to ten
\nyear life, which allows sufficient time for the managers to make
\ninvestments, assist in their maturation process over several years, and then
\narrange appropriate sales of the partnership’s interests.\n<\/p>\n
\nHow do I invest in a venture fund? <\/b>
\n
\nVenture fund general partners accept “qualified” limited partners, who
\ncommit in writing to invest specific sums in their fund. Limited partners
\nbecome parties to the Partnership Agreement, which spells out the terms of
\nthe fund, and must be prepared to invest their commitments when called upon
\nby the GPs. Capital calls are made in some funds over the first years of the
\npartnership’s life, on fairly short notice.\n<\/p>\n
\nHow is my investment repaid? <\/b>
\n
\nWhen a company in the fund’s portfolio is sold or taken public, the
\npartnership receives compensation in the form of stock or cash. The general
\npartner typically distributes any cash proceeds to the limited partners
\nimmediately and will distribute securities when they are free of most
\ntrading restrictions and have reached a reasonable and stable valuation in
\nthe general partner’s opinion.\n<\/p>\n
\nWhat are the income tax considerations of investing in a venture fund? <\/b>
\n
\nVenture capital investments usually span several years and do not generate
\nordinary income. Realized gains on the sale of these investments typically
\nqualify for long term capital gains treatment. In fact, in cases where the
\nLPs receive stock distributions, taxable gains are deferred until the stock
\nis sold by the LP. Most taxable investors find the characteristics of
\nventure capital investing to be particularly advantageous, as investments
\nnormally compound in value over several years free of income recognition
\nuntil sale.
\n<\/P><\/p>\n
\nExcerpted from National Venture Capital Association<\/a> and B4ventures<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" What kind of investors are venture capitalists? Venture capitalists are professional investors who specialize in funding and building young, innovative enterprises. Venture capitalists are long-term investors who take a hands-on approach with all of their investments and actively work with entrepreneurial management teams in order to build great companies. Where do venture capitalists get their […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-17","post","type-post","status-publish","format-standard","hentry","category-angel-investing-venture-funds"],"_links":{"self":[{"href":"https:\/\/www.dshen.com\/blogs\/business\/wp-json\/wp\/v2\/posts\/17","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.dshen.com\/blogs\/business\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dshen.com\/blogs\/business\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dshen.com\/blogs\/business\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dshen.com\/blogs\/business\/wp-json\/wp\/v2\/comments?post=17"}],"version-history":[{"count":0,"href":"https:\/\/www.dshen.com\/blogs\/business\/wp-json\/wp\/v2\/posts\/17\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.dshen.com\/blogs\/business\/wp-json\/wp\/v2\/media?parent=17"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dshen.com\/blogs\/business\/wp-json\/wp\/v2\/categories?post=17"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dshen.com\/blogs\/business\/wp-json\/wp\/v2\/tags?post=17"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}