The worst thing you can do with your money is to leave it in a bank.
Nowadays, there are numerous financial opportunities that you can explore.
Unfortunately, most people are reluctant to invest due to risks involved.
Even when we’re talking about safe bonds or high-quality stocks, people are too afraid to pull the trigger. Instead, they will be satisfied by the fact their money is intact.
One of the best ways to invest is by giving your money to a venture capital firm.
What are these companies?
Simply put, they are organizations that fund new ventures.
They help startups that have great ideas but not enough resources to make them come true.
If you’re a potential investor, putting your money into venture capital firms can bring you higher yields than some other types of investments.
Venture capital firm basics
There are two main types of partners in any venture capital firm:
- General (making investment decisions)
- Limited (providing funds for the firm)
General partners are usually owners or financial experts that established the company. As most of them don’t have enough funds to invest by themselves, they organize business in the form of venture capital firms. Now, everyone who wants to invest can do it through their organization.
Like with everything else, the popularity of a company is directly correlated with management’s expertise. If general partners are reputable investment experts, it will be easier to bring in capital and vice versa.
We also shouldn’t neglect the impact of marketing. Even if you’re not one of the best investors in the field, you will still be able to accumulate the necessary funds by reaching out to the right people.
Limited partners are your standard investors who are only interested in the results and are willing to trust general partners. Limited partners include big organizations such as hedge funds, pension funds, and other similar organizations which have big enough funds to make a difference.
Of course, general partners are also able to invest in these projects, but the sum is usually negligible. It usually amounts to 1% (or even less) of the firm’s funds.
Now you’re probably wondering, what do venture capital firms get in return when they invest?
These organizations are primarily working with startups, unlike private equity companies that work with established firms. So, the company that is looking for funds cannot do it in the form of bonds or stocks. Instead, they are giving a significant part of the ownership.
Still, the ownership structure doesn’t change, nor should it. Venture firms are not interested in managing but instead, investing in businesses that already have an idea and a direction. Due to the nature of the investment, venture capital firms have higher fluctuations.
Some startups will go under, while some will become amazing corporations. It all comes down to general partners and their ability to pick winners.
What is the main appeal for investors?
As already mentioned, the main reason why you should place money in a venture firm is because of the high potential return. However, you need to be careful as risks involved are much higher compared to some other types of investments.
Just imagine funding Google when they were beginning their business.
At the same time, not every company is Google, and there will be some misses along the way that will cost you and the venture firm.
Unlike you, Venture firms make money in several ways like:
- Management fees
If you’re a limited partner, you will have to pay a management fee to general partners. This is similar to any other type of funding where someone is managing your money. This sum is usually paid on an annual level, and it can go anywhere from 2 to 2.5 percent, which isn’t much if the company is providing steady results.
- Carried interest
Managers earn a profit after every successful investment. Carried interest can go from 20 to 25%. In other words, once venture firms get money from a successful investment, general partners will get 20 to 25 percent, while limited partners will get 80 to 75% of that pie.
As you can see, running a company such as this can be very lucrative. Of course, it takes years and years to get to this level of knowledge where you can properly asses startups. It takes even more to become a reputable expert, so it shouldn’t surprise us that these guys are looking for a heft return.
On average, investors get back their money after 3 to 5 years. Once a venture firm is ready to step out, they will seek a solution together with startups management to cash out.
Venture capital history
While “venture capital” sounds modern, the idea is much older than you would think.
Venture capital was initially a branch of private equity. As previously mentioned, it focuses on young, up-and-coming businesses that need a lot of funds to get things off the ground.
Private equity as a concept was around since the 19th century, and venture capital was invented after World War II. It was accredited to Georges Doriot, a Harvard Business School professor. He was the main person behind the American Research and Development Corporation, as he brought about new economic concepts and ideas. One such idea was to start investing in new technologies. The Corporation managed to amass 3.5 million dollars for such investments.
Venture firms followed the technology. So, while most of them received findings from Eastern banks, they were situated in Western states where most tech companies operate.
According to data, Fairchild Semiconductor was the first tech company that received venture firm money. This period is when Silicon Valley slowly started shaping into an area that will attract most tech investments.
One of the first venture companies set up in Silicon Valley was a project of Arthur Rock, a prominent investment banker from New York. His company stood behind some of the biggest tech companies of the time but also of the modern era. For example, they directly funded Intel and Apple.
As time went by, legislative bodies figured out that the future lies in venture capital, which is why they decide to support it as much as possible. Numerous regulatory innovations helped not only existing companies but stimulated other business entities to partake and funnel their money into startups.
The first policies were introduced back in 1958. Most of these laws had to do with taxation. Later on, in 1979, the government decided to assist other aspects of venture capital by allowing pension funds to invest 10% of their total funds into this branch.
List of the most notable venture capital firms in history
Given how old this concept is, you can safely presume there was a handful of venture companies that left their mark on the modern economy. In fact, we wouldn’t be surprised if you’ve heard of some of them.
Here is our list sorted based on year of inception:
1) Bessemer Venture Partners
Locations: Menlo Park, California; Larchmont, New York; Boston; Herzliya; Mumbai
Industries managed: Cleantech, Cloud Computing, Data Security, Financial Services, Healthcare, India Opportunities, Israel Opportunities, Online Retail
Total assets: $2,500 M
Let’s start with one of the oldest venture capital firms in existence. Initially, this company was created as a family firm and was called Bessemer Securities. It was based on an idea by Henry Phipps, who was the mastermind behind it. With success came new opportunities, so, in time, it became Bessemer Venture Partners, focused on venture investments. Funny enough, this company exists to this day. Over time, it spread throughout the country and opened offices on different continents. Like most similar companies that deal with high tech, this one has the main office in San Francisco, California.
2. Norwest Venture Partners
Locations: Palo Alto, California; San Francisco, California; Herzliya; Mumbai; Bangalore
Industries managed: Consumer, Web, cloud and information technology infrastructure, SaaS, Healthcare
Total assets: $6,000 M
Northwest focuses on late-stage venture and growth equity in several major fields. They work with lots of IT companies, and nowadays, they also have some major money in software as a service niche. The company’s headquarters are in Palo Alto, California, but as the IT sector grew globally, they started focusing more and more on the Indian market.
The most staggering piece of information is the fact that this organization has funded more than 600 startups since its inception. At the time of writing this piece, they have around 150 companies under their belt. Some of the company’s most notable investments include Dairy Queen, Spotify, Casper, and Kendra Scott.
3. Greylock Partners
Locations: Cambridge, Massachusetts; San Mateo, California; Israel; India
Industries managed: Consumer Internet, Enterprise IT, and cleantech
Total assets: $2,000 M
Greylock Partners is another example of how a venture company can persist throughout decades if it has good management. Founded by Dan Gregory and Bill Elfers, this organization has found lots of success within the IT sector but is also working with semiconductors.
Initially, venture capital firms had “small” resources at its disposal: they started with 10 million dollars. With time and success, this figure ballooned, and in 1973, they even opened a second fund. One exciting feature of this organization is that they’re setting up communities all over the place. These communities exist so that likeminded professionals can meet up once a year, exchange ideas, and discuss the latest trends.
4. Morgenthaler Ventures
Location: Menlo Park, California; Boulder, Colorado; Boston, Massachusetts
Industries managed: Technology and Life Science
Total assets: $3,000 M
Morgenthaler Ventures are regarded as one of the oldest companies to place their money into both leverage buyout transactions and venture capital. As such, we recognize two sections of the company: Morgenthaler Ventures (venture capital) and Morgenthaler Partners (buyout business).
It was funded by David Morgenthaler, who had extensive financial experience. He made his name working for Forseco Inc. They were making specialty chemicals and funny enough; they were funded by one of the oldest venture capital firms in the US. Seeing the profit potential, David Morgenthaler decided to open a venture capital firm of his own, thus creating one of the oldest companies of this type in America.
5. Mayfield Fund
Location: Menlo Park, California
Industries managed: Consumer, mobile, applications, infrastructure, Energytech, semiconductors
Total assets: $2,400 M
Thomas J. Davis, Jr. and Wally Davis were the two guys who established this company back in 1969. Both of them (they are not related) had extensive experience in finances and investing. Thomas Davis Jr. already had a project of this type under his belt when he created Davis & Rock venture capital firm with Arthur Rock.
Wally Davis was also an established financier and manager, so it was only logical that these two would make their move on the financial scene. Mayfield Fund had funded 492 different ventures during its existence, having 115 exits. Their latest project included Fungible, an intriguing data center management company.
Location: Palo Alto, California
Industries managed: Information technology, healthcare, and energy
Total assets: $2,600 M
Here is a company associated with one of the most prominent financial families in America: the Rockefellers. In fact, the company’s name is a mixture of Venture and Rockefeller. While the company itself was established in 1969, it was an extension of successful investment started in the 1930s.
Venrock was involved with 440 different companies during its lifetime. In 125 cases, it resulted in an IPO (initial public offer). Given its name, background, and history, it is only to be expected that Venrock would be associated with some of the biggest names in the IT world.
Their portfolio is quite amazing, and it includes names such as Intel, Apple, AppNexus, StrataCom, Check Point Software, DoubleClick, 3Com Corporation, Mosaic, PGP, Itek, Digex, Shape Security, Phoenix, Second Rotation. In the last two decades, this venture capital firm is starting to invest more and more in pharmaceuticals as well as in nanotechnology.
7. Charles River Ventures
Locations: Menlo Park, California; Boston, Massachusetts
Industries managed: Technology
Total assets: $2,100 M
Compared to some other organizations on this list, Charles River Ventures is a relatively small enterprise. Nevertheless, it managed to survive throughout all these years, primarily due to its financially savvy management.
Established by Charles Rivers in 1970, this company initially focused on research and innovations that came from MIT students. The company’s focus was to fund innovative projects that were in their initial phases. The company managed to raise 17 funds totaling 3.7 billion dollars. Twitter was perhaps the biggest name financed by this organization. They also had some other lucrative projects such as Zendesk, Udacity, Parametric Technology Corporation, and so on.
8. Fidelity Ventures
Locations: Boston, Massachusetts; London, Great Britain
Industries managed: Information Technology
Total assets: $1,500 M
Fidelity Ventures is a part of Fidelity Investments. As such, it deserves mention on our list even though it hasn’t been as successful as some other venture companies on this list. The venture capital company had offices in two cities: Boston and London. This allowed them to scout emerging companies in both Europe and the East Coast.
At one point, Fidelity Ventures managed 1.5 billion dollars, which is sizable but cannot compare with what other organizations on this list have amassed. Fidelity Ventures had several changes over time, with both their Boston and London offices changing names and management. Nowadays, there are no longer Fidelity Ventures as such.
9. Lightspeed Venture Partners
Locations: Menlo Park, California; New Delhi; Beijing; Shanghai; Herzliya Pituah
Industries managed: Consumer and business networking applications to networking, from computing infrastructure to Cleantech
Total assets: $2,000 M
Snapchat, Double Click, OYO Rooms, Ripple Labs, Ciena, Brocade, Flixster, LiveProfile, Linkamedia, TutorVista, Whisper, are just a few startups that this company has funded. Most of these companies exist to this day, and some of them were bought out by giants such as Cisco, Google, and so on. This venture capital firm invests all over the place.
Besides the US, they have significant interests in Indian, Israeli, and China markets. This diversity helps them find the best, most lucrative startups, which are why they are regarded as one of the more profitable companies on this list. Lightspeed Venture Partners puts particular focus on students and their projects, allowing fellowships to most promising individuals and their incredible innovations.
10. Kleiner Perkins
Locations: Menlo Park, California; Shanghai; Beijing
Industries managed: Alternative energy, technology & Life Sciences
Total assets: $1,500 M
This company was initially known as Kleiner Perkins Caufield & Byers (KPCB), and over time, they have simplified the name into just Kleiner Perkins. This was because its two founding fathers (Caufield and Byers) are no longer with the firm. The company’s numbers are staggering: they have funded over 900 different projects since its inception including some of the world’s biggest giants such as AOL, Amazon.com, Tandem Computers, Compaq, Electronic Arts, JD.com, Square, Genentech, Google, Netscape, Sun Microsystems, Nest, Synack, Snap, AppDynamics, and Twitter.
Basically, if you have any potential as a tech company, you should be looking for Kleiner Perkins to fund your project. If they choose to invest in your enterprise, this is almost a sure-fire sign that your innovation is promising. But the company isn’t satisfied with its previous success. Instead, they are looking into the future. In 2018, they decided to convert their digital growth team into a new company, thus preparing for future challenges.
11. Sequoia Capital
Locations: Menlo Park, California; Beijing; Shanghai; Hong Kong
Industries managed: Components, systems, software and services
Total assets: $4,000 M
Given its long history, it shouldn’t surprise us that Sequoia Capital has gone through several changes. Initially established by Don Valentine in 1972, Doug Leone and Michael Moritz now run it. Like most other companies on our list, Sequoia focuses on the IT sector and emerging markets.
Nowadays, they have investment funds in companies in countries such as China, India, and Israel. The most amazing thing about this firm is the fact that, over their lifetime, they have backed various companies that are now worth 1.4 trillion dollars combined. They focus on several stages of company development, such as incubation, seed stage, startup stage, early stage, and growth stage. Some of the biggest companies funded by them include Google, Apple, PayPal, Instagram, Yahoo!, YouTube, WhatsApp, Oracle, and so on.
We hope you liked our extensive list!
These are some of the biggest venture capital companies in the world who singlehandedly have the power to change international markets.