The Appeal of Venture capital "1"

Successful VCs have mastered the art of spotting one of the lucky few startups that make it big, and betting on them when it’s still too early to tell whether they’ll succeed.

I’m so sorry😣 I’ve been unable to publish an edition, I had lots of drafts but I couldn’t publish due to my focus on my startup, my academics, and my growth, but I’m happy I’ve found a balance and I’m convinced that I’ll remain consistent in crafting contents that’ll impact the world.

If you’re tuning in to this post, you may have heard the term Venture Capital being thrown around, but perhaps never fully understood the core concepts behind it. The goal of this post is to explain Venture Capital in simple terms, to hopefully foster an understanding of the role Venture Capital plays in the startup ecosystem.

Venture capital is a form of financing that individual investors or investment firms provide to early-stage companies that appear capable of growing quickly and commanding significant market share. This financing is generally offered in exchange for equity in the company. Venture refers to the risky nature of investing in early-stage companies—typically startups—with unproven businesses. Investors who provide this financing are called venture capitalists (or VCs).

The term VC is often used to refer to venture capital firms, individual venture capitalists, and the broad category of investment into risky businesses.

Venture capital is, by its nature, a dance between the interests of founders and investors.

Venture capitalists aim for the capital (financial assets or money) they invest in a startup to dramatically increase in value over time, as the company grows. That value will be paid out to investors, founders, employees, and others who hold stock in the company in the event of some kind of exit. To maximize the chances of an increase in the value of a company’s stock and in a successful exit, venture capitalists often provide mentorship, connections, and more to the founders they fund.

On the other hand, the venture capital business model doesn’t care if your company fails—it relies, on the massive success of only a few companies.

Venture capital pushes companies to grow very big, very quickly, and venture capitalists can pressure or even force founders into making decisions for their businesses that serve that growth over all else.

No matter which financing structure is used in an investment deal, venture capitalists are always purchasing part of a company. Founders want to hold on to as much ownership as they can—because more equity usually (though not always) means more control—while raising sufficient money for their company to achieve desired growth.

Types of Venture Capital

Typical explanations of the types of venture capital divide it into three main groups, based upon the business stage that needs funding. This list provides a brief explanation of these venture capital types and the various business stages that they may apply to:

  • Early-stage: This might include seed financing, which is usually just a small amount of capital that will help the founders qualify for other loans. True startup financing provides enough capital to finish a service’s or product’s development.

    In contrast, startups might also get first-stage financing after they have finished development and need more funds to begin operating as a full-scale business.

  • Expansion: This kind of venture capital helps smaller companies expand significantly. For instance, a thriving restaurant may decide it’s time to open more locations in nearby communities. Sometimes, it also comes in the form of a bridge loan for businesses that want to offer an IPO.

  • Acquisition: Sometimes called buyout financing, this type of funding may help acquire other businesses or sometimes, just parts of them. For instance, some groups may use acquisition financing to buy into a particular product or concept, rather than using it for buying the entire company.

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Ten things I learned from Aaron Fu

One thing I love doing a lot is learning from superiors and thought leaders. I believe I can learn a lot from studying the connected and unconnected dots in the journey of successful impact makers.

One of the persons I’ve learned a lot from is Aaron Fu, growth @catalystfund, cofounder of venture4Africa.

Here are my 10 bests pieces;

  1. Nothing compares to the thrill of launching something you aren't sure will work. >>>

  2. Failing and falling hurts, scream and cry if you must, but get up, run again, run harder, fall harder, run harder yet again. Before you know it, you’ll never crawl again. Babies can, so can you

  3. Don’t be obsessed with titles and rank. >>>

  4. You can unlock a lot of opportunities just by being ultra-responsive and diligent

  5. Startups should be raising to smash goals 💥 + accelerate reaching milestones 🏃🏻♂️- not to extend the runway. >>>

  6. Build the best you can with what you have. >>>

  7. The default, most likely, the outcome for #startups is a failure. You must expect and be comfortable with it.

  8. Your company culture isn’t what the handbook says it is, it’s in the way you interact with each other every day, it’s in the way you handle differences, support each other, disagree, challenge each other. >>>

  9. Africa is not just a recipient of global technology but is a SOURCE of technology that has and will continue to solve problems all across the world >>>

  10. The focus of VC is to support and encourage crazy dreams into reality, not burden them with reporting.

    Still, so many investors out there spending so much of their time asking founders for updates and so little of their time using those updates to actively support founders. >>>

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References; 1 & 2