Features, Phases and Types of Venture Capital 

The concept of venture capital (VC) is focused on supporting startups during their early stages, when they have limited access to traditional funding options. Earlier, Anand Jayapalan had spoken about how startups not only provide financial support to companies, but they may also offer industry expertise, mentorship and strategic guidance needed by those enterprises to grow and succeed.

Venture Capital has certain distinct features that differentiate it from other forms of financing. Here are a few of those features:

• Equity investment: Venture capitalists offer funding in exchange for equity ownership in the company. Hence, they become shareholders of that firm.
• High-risk, high-reward: VC involves investing in early-stage or high-growth companies. This investment approach does carry a good level of risks, but also has the potential for significant returns.

• Active involvement: Venture capitalists often go beyond offering capital, and take an active part in the strategic decision-making of a company. They may provide startups with valuable industry connections and mentoring. 

• Long-term perspective: Venture capitalists generally embrace a long-term outlook. They understand that startups would need adequate time to grow and achieve profitability.

• Sector focus: Most venture capitalists specialize in particular sectors that have abundant opportunities for growth. They leverage their expertise and networks for informed investment decisions.

Earlier, Anand Jayapalan had discussed that venture capital can be classified into multiple categories, depending on the funding structure, industry focus and stage of investment. Here are some of its common phases and types:

• Seed capital: Seed capital implies to the initial investment provided to startups during the early stages, and helps entrepreneurs to convert their ideas into viable businesses. Apart from early-stage venture capital firms, seed capital can also be sourced from angel investors.

• Early-stage venture capital: Such venture capital targets startups that have progressed beyond the seed stage, and have at least a proven concept or prototype. Early-stage venture capital can help startups to refine their products, build their team and prepare for market entry.

• Expansion or growth capital: Such capital is meant for established companies that aim to scale their venture, expand their operations or enter new markets. It assists companies in the growth phase to efficiently accelerate their growth trajectory.

• Mezzanine financing: Mezzanine financing tends to involve a combination of debt and equity financing, and is generally provided to mature companies that are close to going public or even are undergoing certain major events like acquisitions or management buyouts. This financing option helps bridge the gap between equity and debt financing.

• Sector-specific venture capital: Sector-specific venture capital targets particular industries such as technology, healthcare, clean energy, or biotechnology. These venture capitalists have specialized knowledge and networks within their chosen sectors, which enables them to offer customized support to startups in those fields.

• Corporate venture capital (VC): This form of VC implies to investments made by established companies into startups that align with their important strategic objectives. Corporate venture capital helps companies to gain improved exposure to innovative technologies, diversify their product offerings and expand into new markets.

The type of venture capital a business needs depends on several factors, including the industry, stage of development, and specific requirements of the business.