The venture capital process 

The first step for any business looking for a venture capital investor is to produce and present a proper business plan, either to a venture capital company or to an angel investor.

If the VC company finds the business proposal interesting, the company or the investor must then perform a due diligence, which includes a thorough investigation of the company’s business model, pricing model, products, management, and operating history, among other things. Since venture capital tends to invest a fairly large capital amount in fewer companies, this due diligence research is very important.

Many venture capital professionals have had prior investment experience, often as equity research analysts, others have a Master in Business Administration (MBA) or has successfully sold and exit their own business as a prior experience.

Venture capital professionals also tend to concentrate in a particular industry. A venture capitalist that specializes in fintech, for example, may have had prior experience as a fintech industry analyst or has run their own business in the fintech sector and successfully sold or exit that business.

Once due diligence has been completed, the founders of the company and the investor will negotiate a specific amount of investment of capital in exchange for a specific amount of equity in the company. These funds may be provided all at once, but more and more common the capital is provided in rounds. 

The investor then typically takes an active role in the funded company, advising and monitoring its progress before releasing additional funds.

The investor exits the company after a period of time, typically around five years after the initial investment, by initiating a merger with another company with synergies , acquisition of another business with synergies or an initial public offering (IPO) listing the company on an exchange.