2.4 Venture capital

Venture captains in the business environment are called venture capitalists (or VCs). VCs are structured firms that invest previously collected funds in an ambitious project (i.e. a venture). VCs differ from BAs, as the former invest their funds through a managed fund (called a Venture Capital Trust), which is established using either private or public resources. The fund is managed in order to make a return for the fund’s investors. Compared to the structure of BA investment, VC investment carries substantial administrative costs, such as management fees, and organisational expenses, like consulting and research. In addition, the fund needs to sustain a consistent return for the investors. For these reasons, VCs will be more selective and prefer projects with a track record of good performance. Hence, VCs generally become involved with projects that are more mature than the ones targeted by BAs.

VCs usually invest sums above £1 million and expect high returns, as well as direct and constant involvement in the decision-making process within the business. As in the case of BAs, businesses agreeing to VC funding should be prepared to lose part of their equity control over the business. In Europe, the UK stands out as the major market for VC funding that finances growing businesses.