Venture capital investment
Venture capital investment

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Venture capital investment
  • Background to venture capital investment
  • Why seek investment?
  • Types of investment and investors
  • Commencing the process
  • Due diligence
  • Financial
  • Legal
  • Technical
  • Consents and approvals
  • More...

Venture capital is a type of private equity investment provided to early stage, start-up businesses with little or no operating history.

Background to venture capital investment

Why seek investment?

Businesses that seek venture capital investment are generally too small to raise capital in the public markets and are unable to secure debt finance.

The combination of a lack of operating history and, in many cases, an unproven business model underpinned by untested technology, makes investing in such businesses a high-risk strategy.

Investors interested in these types of businesses will usually bring technical, as well as managerial, expertise to the management team. However, they will look to make high rates of return on their investments because of their high-risk nature.

Types of investment and investors

There are different phases of venture capital investment, depending largely upon the stage of the investee company’s development and the level of investment required.

First round investment in very early-stage businesses, or seed capital investment, is usually confined to family and friends of management, as well as business angels.

Second and subsequent rounds of investment, beyond seed capital stage, are generally the focus of venture capital firms, investment trusts, venture capital trusts, enterprise capital funds and business angels.

Venture capital funds (otherwise referred to as private equity funds) are operated by investment professionals who establish and manage distinct funds for venture capital investment purposes. Venture capital trusts are listed on

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