An Overview of the Venture Capital Industry | mumble in the jungle

An Overview of the Venture Capital Industry


The field of venture capital is a very risky type of financial investment. If it works, however, the returns are huge. The concept itself has been around since humans first started to use money, but it continues to be an individualized and fragmented form of practice. In fact, it is only in the past 40 years or so that people like Gregory Lindae have started to become recognized as experts in a sophisticated, mature, coalescent field.

A History of Venture Capital

It is believed that General Doriot was the first recognized venture capitalist. He set up the American Research and Development Fund in 1946 at the Massachusetts Institute of Technology. His aim was to finance new technologies and their commercial exploitation, specifically those developed by universities in the US. Thanks to the small business Act, the Small Business Administration was formed, which licensed small business investment firms and even provided them with financial support. What this did was accelerate the field of venture capital finance as a whole.

This gave rise to large companies, including General Electric, 3M, and Xerox, to become interested in it, starting venture capital divisions. In so doing, they turned it into a global industry. In the early 70s, attempts were made to introduce venture capital, but this was quite unsuccessful. During the next decade, however, the high-tech explosion happened and a phenomenal growth in venture capital was observed. Indeed, the industry truly blossomed and, suddenly, everybody wanted to be involved in it.

Today, venture capital is still an essential type of finance for startup businesses, or those otherwise in their early stages. Similarly, businesses going through turn around situations require this type of investment to be successful. Funds come from a range of different sources, however, and this is where experts like Gregory Lindae are needed the most. For instance, a popular form of funding is through share capital, in which case the money is kept within the business permanently. Debentures, by contrast, are held for a long period of time, but not indefinitely. And there are also numerous funds that are only kept for a short period of time. Put together, these funds create the financial structure of an organization. In most cases, short-term funds do not get included in this, because of their short-term nature. They shift quickly from one area to the other, in other words. Hence, the focus is often more on the long-term funds, which are described as the capital structure of an organization.

People like Lindae understand the risks involved in venture capitalism. You never know, after all, whether a startup business will become successful or not. However, they also know that, if the gamble pays off, it pays off massively. Facebook, Google, Microsoft, Apple, Xerox, and so on, were all startup companies at some point, and there are plenty of people who wished they had invested in these types of ventures when they had the chance. A venture capitalist, therefore, is someone who can see that next big opportunity coming.