Private Equity: Episode 12 – Venture Capital
Focus on Venture Capital
As we’ve seen, Venture Capital has played a key role in the development of the Private Equity sector. It's time to take a closer look at this activity!
In practice, it involves investors who take stakes in startups at early stages of development in order to help them grow. The goal of this type of investment is to generate significant capital gains by supporting the rapid expansion of the company. Therefore, these investors primarily target projects with the highest growth potential.
Beyond providing capital, they typically also support founders by offering their expertise and networks. This added credibility helps the young company form new partnerships, secure additional banking funding, or accelerate its expansion into specific markets.
There are different types of actors and levels of involvement depending on the startup’s stage of development.
Pre-seed funding, aimed at financing the very first stages of the project, is often provided by close contacts (love money), business angels, startup studios, crowdfunding, or specialized support networks.
Seed funding is typically provided by business angels, incubators, and certain specialized funds. They help to structure the idea, create a prototype, or find the first customer.
The next stage involves structuring the company, making it more efficient, and expanding its customer base. First hires may take place during this phase as the company enters a true acceleration phase: this is known as seed capital. Business angels are still involved, but increasingly organized funds provide larger investments, including Bpifrance.
The final stage of funding corresponds to growth capital. This is the main stage of the venture: large investment funds now step in! They deploy significant resources to help the startup scale. The goal is to make it profitable and resilient.
The ultimate step for the startup is usually to sell to a large company or undergo an IPO.
Note that other development possibilities exist, such as bootstrapping for instance! Growth at all costs is not necessarily the ultimate goal nor the model pursued by every project.
