What are venture capital funds and how do they work?
VC funds don’t always receive the same attention as their colleagues in the private equity and broader asset management space, and historically they’ve sometimes been seen as a bit mysterious. Here is an overview of exactly what venture capital funds are, how they work, and the different types of VC funds, while also providing some advice on how family offices can go about choosing a venture capital fund to invest in.

What you need to know

  • A VC fund is a pool of capital that is specifically aimed at investing in early-stage companies with strong growth potential.
  • VC funds are considered a high-risk investment, due to the potential high failure rate of early-stage businesses. However, VCs who get it right can make considerable returns.
  • Each VC fund has its own investment strategy and criteria, in terms of the sectors, business models and types of technology it invests in, as well as the size of investments that it makes.
  • VCs must identify promising start-ups, undertake extensive due diligence, and then agree on deal terms. Once a deal is formalised, VCs and startups are usually together for around five years or more.
  • Choosing the right VC partner is vital and it is important to shop around to find the right strategic fit.
Venture Capital Published on Simple November 2, 2022

About the Authors

Kjartan Rist

Kjartan Rist

Venture capital investing

Kjartan is a Founding Partner of Concentric, the London & Copenhagen-based venture capital firm. He helps family offices gain a better understanding of VC investments and how to allocate towards this.

Connect with Kjartan Rist

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