VC (Venture Capital)
Venture Capital (VC) is a form of private equity financing where investors provide funding to early-stage, high-growth startups in exchange for equity ownership, with the expectation of a significant return on exit.
In depth
VCs raise a fund from limited partners (LPs) — pension funds, endowments, family offices — and invest it in startups. They typically invest in 20–40 companies per fund, expecting most to fail or return capital, and a few to return 10–100× to make the fund profitable.
VC funding stages: - Pre-seed: $250K–$1M, often from angels or micro-VCs - Seed: $1M–$5M, product and early traction - Series A: $5M–$15M, proven growth and unit economics - Series B+: scaling a proven business
VC is NOT right for every startup. VC requires a path to a $100M+ valuation (to return a meaningful portion of the fund). Lifestyle businesses, freelance platforms, and small market opportunities don't fit the VC model.
Alternatives to VC: bootstrapping, revenue-based financing, angel investors, crowdfunding (Republic, Wefunder), and grants.
Real example
Sequoia invested $60M in Airbnb at a $1.2B valuation in 2011. When Airbnb IPO'd at $47B in 2020, that stake was worth ~$2.3B — a 38× return. This one investment returned Sequoia's entire fund.
Tools & calculators
Related terms
ARR (Annual Recurring Revenue)
Annual Recurring Revenue (ARR) is the yearly equivalent of your recurring subscription revenue. It's MRR × 12 and is the primary metric investors use to value SaaS companies.
CAC (Customer Acquisition Cost)
Customer Acquisition Cost (CAC) is the total cost of acquiring one new paying customer, including all marketing and sales spend.
LTV (Lifetime Value)
Customer Lifetime Value (LTV or CLV) is the total predicted revenue you'll earn from a customer over the entire duration of your relationship.
Startup Runway
Startup runway is the number of months a startup can continue operating before running out of cash, given its current burn rate and cash balance.
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