A start up venture capital is simply a type of private equity capital that is being provided to fund start up companies with high growth potential. In its most basic form, venture capital is being given in the form of cash by people known as angel investors. In exchange for the capital, the investors are given a stake in the start up company in the form of shares.
Start up venture capital was once the domain of wealthy individuals and families in the early 20th Century. There were notable families with riches that many upstart businesses then relied on to help gather up some start up capital for a business that shows some potential. In the United States, there were wealthy families such as the Rockerfellers, Warburg and the Vanderbilts who were noted for their investments on several industrial and private companies during the early 1900’s. During this time, it was not yet known as venture capital but more commonly called as developmental capital.
It was not until after World War II that venture capital investments ceased to be a realm of wealthy families. Sometime in the 1940’s, venture capital firms were set up in order to help and encourage the private sector to invest in businesses. The firms initially targeted returning GI’s. These venture capital firms were the first of its kind then in that they helped raised capital funds that did not come primarily from the wealthy families.
Technology And Venture Capital
In the subsequent years, venture capital firms focused more and more on investing in technology companies. It was s time when many technological breakthroughs in electronics, data processing and the medical field were rampant. The late 60’s up towards the 70’s saw many venture capital firms eyeing investments mainly in technology. It was also during this time that venture capital became almost synonymous with technology finance because on its perceived focus in terms of investments.
The venture capital industry first saw its successes bore fruit during the 70’s and the 80’s. With many start up technology businesses sprouting up and became big companies. This led to many other capital firms venturing out into trying to provide start up funding to new businesses that show high potential for growth. The growth of the venture capital market itself suffered as more and more players entered into the fray.
With many venture capital firms increasingly looking for that next big thing, the risks that they took to determine the potential of certain start ups for growth and success somehow also increased. Many venture capital firms suddenly found themselves facing declining returns that didn’t seem to go well with their expectations for some of the start ups they funded.
Along with the competition, occasional dips in the overall business climate also affected the returns for most of the venture capital firms. It even worsened during the stock market crash in 1987 where many IPO’s collapsed. This also led many of the venture capital firms to close shop.
The 90’s brought about a shake up in the venture capital industry that eventually helped brought about much needed improvement. The boom came when the Internet began making waves and the started the dotcom boom. This led to many start up venture capital firms to provide funding to many of the online domains trying to make their mark on the Web. It stretched until the year 2000 when the dotcom bubble finally burst.