| Definition: | The Venture Capital () Industry is a major source of funding for the entrepreneurial community. The industry itself has evolved over a number of years, but has only recently emerged as a popular career for many new MBAs. The industry focus is on early stage, pre-IPO funding opportunities. Typically a fund will be raised, that will be invested in a number of different opportunities, that are reasonably high risk. In return for the investment, the VC receives an equity stake in the business. The VC also helps the business develop its management team, and takes seats on the board of the company. VCs are typically interested in making few large investments, due to the manpower needed to support each investment (recruiting and board seats). They focus not only on the business opportunity that is presented to them, but closely on the management team that is offered (human capital is clearly becoming the differentiating advantage of any business at this point!) In order for an entrepreneur to have an audience with a VC, s/he needs to have a pre-existing connection (a reference to the VC). Without this, the VC is unlikely to review the business plan. This further supports the notion that the VC and entrepreneurial community in Silicon Valley is a ecosystem that benefits from the mutual relationships that are already established, and is resistent to outsiders looking in (almost a closed system!)
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