What Is Venture Capital?

What Is Venture Capital - @CBinsights provides a deep dive into the fundamentals of venture capital.


What is venture capital?

The VC food chain

The venture deal

The venture capital financing cycle: seed to exit

Thanks Daniel for sharing this article.Can you reply to one of my question

Are there also investors or programs who invest on Project based revenue sharing ?

I don’t have any names for you but outside the normal circle of startup (VC-type) investors you might be able to find investors / corporate who might be open to consider revenue sharing deals. I mean, i don’t know enough about your specific situation, but here a few thoughts around the topic.

The challenges with revenue share deals are:

  • Given the early stage (assuming you project is a startup) there is a high uncertainty around revenue generating potential
  • Startups are cash strapped, an additional outflow isn’t helpful

Revenue share deals also have more the character of a partnership deal than a long-term investment. If the investor believes in your venture and the potential, shouldn’t be the logic that a in your hands should generate a higher return than a in the pockets of the investor.

What I have seen is Corporate VCs who sell the startups product (e.g. Mobile Operator bundling and promoting an premium subscription) taken a revenue share cut. But that is more a “classical” sales deal, the startup would do such a deal with all other telcos.

Why I asked you this specific question was because we have been able to generate revenue, in fact decent for a start up, what we are lacking is due to insufficient financial backing we are only doing small projects and passing high revenue opportunity to avoid high financial risk.I was keen on revenue sharing investor as most of our projects are guaranteed revenue(Fix term recurring contracts) and moreover being a start up to develop new services/products we need some independent freedom for now.

Got it. When you say “…most of our projects…to develop new services/products” that sounds always a little bit scary to investors. They want to invest into a scalable service or product, not in a portfolio with a variety of (unrelated non complementary) services. A core proposition the team is focusing on and that can be scaled. Investors can diversify themselves through investment in different startups.

1 Like