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Finance for Non-Financial Managers
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to prove the soundness of the business concept, to begin the
development of the product or service, and to start building the
organization.
Perhaps most important to the founder who will need more
money as the company gains momentum, first-round investors
may facilitate introductions to later-stage investors who might
be willing to invest larger amounts of money, based on the com-
pany’s results, thus enabling further progress toward profitability
and a handsome return for all. Prominent among these next-
stage investors are the money managers known as venture cap-
italists.

Venture Capitalists: What You Need to Know to
Attract Them
When more money is needed than the angels can provide or
when the angels want others to invest to support their early
stakes, a young company may seek out the institutional
investors, the folks known as venture capitalists (VCs to those
inclined to buzzwords).
The venture capitalists’ job is to evaluate the investment
opportunity, make the investing decision, and then monitor the
investment’s performance over time, with the hope of selling the
investors’ shares at a profit for the investors (and themselves,
since these folks usually accumulate shares for their personal
accounts along the way, sometimes by direct investment and
sometimes in the form of options or warrants for their services).

Venture capitalist (VC) A member of a firm that invests
in emerging companies, many in start-up mode, typically for
others rather than for their own account, often by starting
an investment fund and convincing other institutions, corporations, or
wealthy individuals to passively invest in the fund and then finding
good opportunities for investing.VCs also provide assistance in guiding
the growth and subsequent funding of their portfolio companies until
they are either sold to other companies or sold to the public in a
public offering of shares (see “The Initial Public Offering” below).