02.10.2009 14:55:27

Investors Network Team

When looking for funding, entrepreneurs may often become confused with the various funding sources available. With the term Venture Capital becoming an everyday term for business finance in some circles its important to distinguish between venture capitalist, business angels and other types of business finance providers.

A venture capitalist(VC) is a person who provides equity financing to companies with high growth potential. The money that a venture capitalist invests in a company is called venture capital. Venture capital firms are often limited partnerships that comprise a few venture capitalists. Each venture capital firm manages a venture fund, which is often comprised of a large pool of money--anywhere from R25 million to R1 billion--that the firm invests in growth companies. A venture capital fund consisting of third-party investments can finance enterprises that are too risky for debt financing. Each VC firm invests in several companies and this group of companies is called the firm’s portfolio companies or portfolio.

Most VC firms have different kinds of executives: general partners, limited partners, venture partners and entrepreneurs-in-residence apart from associates and office staff. General partners are the primary investment professionals in a firm. General partners collaboratively manage the firm’s venture fund. Limited partners are the individuals who invest in the venture fund. Venture partners bring in deals and receive income on deals they mark. General partners on the other hand receive income on all deals.

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