Venture Capital
Full form: VC
InvestmentsVenture Capital is private equity funding provided to early-stage startups with high growth potential in exchange for equity. VC funding is not accessible to retail investors directly -- it is for institutional investors and HNIs. However, understanding VC helps evaluate listed startup stocks.
In detail
VC funding stages:nPre-seed/Angel: idea stage, Rs 10L - Rs 1 CrnSeed: early product, Rs 1 Cr - Rs 10 CrnSeries A: proven product-market fit, Rs 10 Cr - Rs 100 CrnSeries B/C: scaling, Rs 100 Cr+nPre-IPO/PE: large scale, near profitabilitynnVC investor types:nAngel investors: wealthy individuals (any net worth above Rs 2 Cr)nVC funds: pooled vehicles (Sequoia India, Accel, Tiger Global)nCorporate VC: strategic investments (Reliance, Tata)nnFor retail investors:nAlternate Investment Funds (AIF): minimum Rs 1 Cr, for accredited investorsnSME IPO: small startup listings accessible at lower amountsnListed startup stocks: Zomato, Nykaa, Paytm -- evaluated as listed equities
Real-life example
Sequoia invested Rs 50 Cr in Byju's at Series B (valuation Rs 200 Cr). By 2022: Byju's valued at Rs 1.8 lakh Cr. Sequoia's Rs 50 Cr theoretically worth Rs 4,500 Cr -- 90x return. The VC model: invest in 20 companies, 15 fail, 3 return 2-3x, 2 return 100x+ (the unicorns pay for everything). This extreme outcome variability is why VC is not suitable for retail investors needing stable returns.