Venture capital

Published on September 28, 2023   7 min
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My name is Rudy Aernoudt. I'm professor at the University of Ghent in Belgium, and the topic of today is about venture capital.
When we speak about venture capital, it means we're going to do a venture together. The investor and investee becomes together owner of a company. When contradiction to banks who are giving credits, an investor will be co-owner of the company and this makes of course a big difference. They are doing a venture together. That's where the name venture capital is coming from.
When we speak about venture capital, stricto sensu, venture capital has three levels. First of all we have seed, which is the financing of the very early start of the company. The second level we call it early stage, and the third level we call it expansion or scale-up. In the venture capital, we have three different compartments.
The investment has to be considered stage by stage. Seed, when we speak about seed, it means financing the very beginning of the company. We're speaking roughly about amounts less than 200,000 in order to finance what we call the Pre product, we start by financing. We are looking for a return which is 25 multiples. This means that the investor once at the end of the road 25 times more the money that he or she invested. This high level is of course understood by the fact that the risk is very high and a lot of these companies just go bankrupt. After the seed investment, mostly you have the angel investment, amounts from 200,000 to one million and then we speak about series A, B and C. Depending on the level of the evolution of the company. Series A is from 1-3 million, series B is from 4-8 million, and series C is from 8-50 million. Series A meaning the inital revenues, series B, we are scaling, and series C, we have some profitability in sight. The venture capital, why do we need it?