Venture Capital funds
Venture capital funds support promising and fast-growing businesses that do not yet have a regular income stream or a proven revenue model. Find out how a venture capital fund works.
What is ‘venture capital’?
Venture capital is a form of financing for young, promising businesses in sectors such as deep tech, sustainability, IT, and life sciences. It is also known as risk capital or growth capital. A venture capital fund invests in businesses with:
- an innovative product or technology
- a large market
- strong growth potential
How a venture capital fund works
A venture capital fund raises money from various investors, such as pension funds, businesses and individuals investing their own money. The fund uses this money to finance multiple start-ups and scale-ups.
Selection of businesses
A Venture Capital fund receives hundreds of applications per year. It only selects the most promising proposals. They look at:
- the quality of your team
- the technology or product
- the size of the market
- the expected growth
Investment in exchange for shares
A venture capital fund typically invests between €250,000 and several million euros. In return, the fund receives a percentage of the shares in your business.
Active support and influence
Venture capital funds also use their network, knowledge, and entrepreneurial experience to help your business grow. In exchange for the shares, the investor gets a say in your business.
Exit: moving forward without venture capital
The aim is for your business to increase in value after a number of years, so that the investor can sell the shares at a profit. This typically happens after 3 to 7 years, for example through:
- a takeover
- a subsequent investment round
- an introduction to the stock market
This is known as an exit.
Applying for funding from a Venture Capital fund
A venture capital fund wants you to understand how the fund thinks and that you can view your application from their perspective.
In your business plan you explain:
- what problem you will solve
- how your solution works
- who your customers are
- how you make money
- how big the market is
- what your growth plans are
A pitch deck usually contains 10–15 slides covering:
- your product
- your team
- the market
- financial projections
- the investment amount you need
Not every fund is suitable for every business. You can search by:
- the sector in which you operate: for example, tech, healthcare, energy, sustainability
- the stage your business is at: from a start-up (pre-seed and seed) to a business looking to scale up and invest (Series A)
A complete overview of venture capital funds can be found at the Dutch Association of Private Equity Firms (Nederlandse Vereniging van Participatiemaatschappijen, NVP).
Send a brief introduction including:
- what your business does
- why your business is unique
- what results you have already achieved
- how much funding you need
When interested, the investor will check out:
- your financials
- your team
- your product
- your strategy
This is known as a due diligence review.
Upon agreement, you will finalise the terms regarding:
- equity percentage
- investors’ rights and obligations
- reporting
- conditions for follow-on funding
It is advisable to call in an advisor for this.
A form of ‘private equity’
Venture capital is a form of financing known as ‘private equity’ (private equity). Private equity investors purchase shares in a company. The value of these shares may rise or fall. This risk is borne by the investor, as they are a shareholder.
Other forms of private equity include: