FREE online courses on Venture Capital Funding - The Venture Capital Industry - Commitments of capital

 

The process that venture firms go through in seeking investment commitments from investors is typically called “fund raising.” This should not be confused with the actual investment in  “portfolio” companies by the venture capital firms, which is also sometimes called “fund raising.” The commitments of capital are raised from the investors during the formation of the fund.

 

 

·         A venture firm will set out prospecting for investors with a target fund size.

 

·         It will distribute a prospectus to potential investors and may take from several weeks to several months to raise the requisite capital.

 

·         The fund will seek commitments of capital from institutional investors, endowments, foundations and individuals who seek to invest part of their portfolio in opportunities with a higher risk factor and commensurate opportunity for higher returns.

 

·         The venture fund will have from a few to almost 100 limited partners depending on the target size of the fund. Once the firm has raised enough commitments, it will start making investments in portfolio companies.