Comprehensive Narrative Handbook on the Venture Capital Industry

ankitmorajkar
Mar 30
39 min read

This blog is intended purely for my personal learning and educational purposes. The content has been entirely generated with AI. Feel free to read and explore—it reflects a research exercise rather than professional guidance. Full prompt at the end.

Origins and Evolution of Venture Capital

The roots of venture capital stretch back centuries, but the modern VC industry began in earnest in the mid-20th century. Early precedents include wealthy families and entrepreneurs funding innovation (for example, historic backers like the Rockefellers or JP Morgan’s investments in Thomas Edison)[1]. The first institutional venture fund was American Research and Development Corporation (ARDC), founded in 1946 by MIT professor Georges Doriot. ARDC’s landmark success was an $70,000 investment in Digital Equipment Corporation that grew into a $355 million stake by its IPO, generating a 1,000+X return (over 100% IRR) and demonstrating venture capital’s potential[2]. In the 1950s and 1960s, other pioneering funds emerged in the U.S., including J.H. Whitney & Company (1946) and Fairchild Semiconductor’s venture spin-outs, and by the 1970s Silicon Valley was firmly established as the world’s leading innovation hub. Don Valentine’s founding of Sequoia Capital in 1972 in Menlo Park anchored Silicon Valley’s venture ecosystem; early Sequoia deals included Atari and Apple, laying the groundwork for future tech titans[3].

From this American beginning, VC gradually spread globally. Europe’s venture scene lagged at first; banking systems and regulation impeded early growth. Venture activity picked up in the 1980s and 1990s with the rise of technology and liberalization of financial markets. Countries like the UK, France, and Germany built nascent VC industries through government programs and tax incentives (e.g. the UK’s Enterprise Investment Scheme), and the formation of pan-European funds. Asia saw its first venture efforts in the late 1980s: for example, India’s first institutional VC, the Technology Development and Information Company of India (TDICI), was established in 1988[4]. Over ensuing decades, China, India, and Southeast Asia became major players. By 2020 China had developed the world’s second-largest VC market after the U.S. – a testament to generous state support and booming tech entrepreneurship[5][6]. India’s startup ecosystem similarly accelerated, growing into the third-largest globally with over a thousand unicorns by the mid-2020s[7]. As VC expanded worldwide, the U.S. share of global venture financing fell from about 84% in the early 2000s to roughly half by the mid-2020s[6][8]. This reflects surging investment in China, India, Europe and beyond.

Throughout these decades, venture capital evolved in cycles tied to economic and stock market booms and busts. The industry saw its first major boom in the 1980s (driven partly by deregulation and the rise of Silicon Valley companies), a second in the late 1990s dot-com bubble, a third in the post-2003 recovery through the mid-2000s, and a massive surge again in the late 2010s. Each cycle saw blistering growth in fund raising and exits, followed by corrections – and often consolidation of funds. For example, as technology valuations soared in 2020–21, VC investment reached record levels (the U.S. funded $240.9B in 2022, the second-highest yearly total on record[9]), but this was followed by a sharp pullback in 2023 (firms raised only $66.9B in 2023 vs. 2022’s $163B[10][11]). Such cycles reinforce that venture capital is inherently high-risk and sensitive to market sentiment.

Economic Rationale and Position of Venture Capital

Venture capital serves as the engine fueling innovation and high-growth startups that create significant economic value. By providing equity capital and strategic support, VCs enable companies with unproven technologies or business models – which traditional lenders might eschew – to develop and scale. For example, NVCA reports that since 1974, venture-backed companies have accounted for roughly 42% of U.S. IPOs[12] and, among those, represented 63% of market capitalization and 85% of R&D spending[12]. This illustrates how venture-backed firms disproportionately drive innovation. Notably, startups have generated nearly all the net new U.S. jobs since the late 1970s[13], underscoring VC’s broader economic impact.

As an asset class, venture capital occupies a distinct niche in the alternatives landscape. Compared to public equity or fixed income, VC investments are highly illiquid and long-term (typically locking up capital for 10+ years). Compared to hedge funds (which often employ liquid strategies) and buyout-oriented private equity, venture funds accept much higher failure risk in exchange for potential outsized returns from “home run” exits. This skewed payoff – often described as a power-law distribution – is a core rationale of VC: a small number of breakout successes (e.g. Google, Facebook, or Airbnb) yield enormous multiples and drive the overall returns for a fund, while the majority of startups in the portfolio may fail or provide modest outcomes. The case of the ARDC-DEC investment illustrates this extreme; similarly, historically, an investment like $12.7M into Facebook produced over $8B in value for Accel within a decade[14].

Institutional investors (LPs) allocate to venture capital seeking diversification and access to innovation-driven growth. True VC performance data is often private, but industry benchmarks suggest venture returns have generally outpaced public markets over long periods, albeit with higher volatility. For example, Cambridge Associates’ U.S. Venture Capital Index typically showed IRRs above those of the S&P 500 over multi-year horizons (though performance varies across vintage years and between top-tier vs lower-tier funds). Within alternatives, VC’s correlation to public markets tends to be low, making it attractive for portfolio diversification. In recent years, the value managed by VC has grown enormously: the U.S. venture industry’s total assets under management reached around $1.21 trillion by 2023[11]. Despite this scale, venture remains a relatively small slice of total global financial assets, yet it is viewed as a key high-growth component of institutional portfolios, sitting alongside buyout private equity, hedge funds, real assets, and the public equity/debt markets.

Formation of Venture Capital Firms

Launching a venture firm typically begins when experienced individuals (often former entrepreneurs or fund executives) decide to pool capital to back startups. Founding partners commonly pair complementary backgrounds: for instance, one may be an ex-CEO or technologist while another brings finance or investing acumen[15]. A great illustration is Andreessen Horowitz itself: Marc Andreessen and Ben Horowitz were successful tech founders (of Netscape and Opsware) before teaming up in 2009. Many founding teams emphasize a mix of operator experience (so they can advise startups) and investing insight (for deal evaluation). Carta notes that emerging GPs should ideally have a “compelling thesis, strong founder relationships, domain expertise, and competitive drive”[16]. Reputation and track record are crucial: new firms often begin by leveraging the personal brands of their partners. For example, Nexus Venture Partners in India was co-founded by experienced VC and tech executives (former Sequoia India partners), and its early credibility was based on those founders’ track records.

Once established, a firm’s strategy is articulated through its investment thesis and mandate. Key strategic decisions include which stage(s) to target (seed, early/Series A, growth/crossover), which sectors to specialize in (e.g. biotech, software, climate tech), and which geographies to cover. Some funds remain generalist (like Sequoia initially funded everything from hardware to internet), while others focus tightly (for instance, funds devoted exclusively to seed-stage or to industries like fintech). Historically, roughly three-quarters of VC deal volume is early-stage (seed or Series A), reflecting the fact that many firms exist primarily to nurture nascent startups[17]. Thus a typical new fund might declare it invests in U.S. early-stage software companies, or in Southeast Asian consumer internet companies, etc. This clear focus helps the firm build the right expertise and sourcing networks.

Recruiting an early team involves adding fellow partners, principals, and associates who share or complement the founding partners’ vision. These hires may come from banking, consulting, large tech firms, or other venture funds. Firms typically look for individuals with strong analytic skills and industry networks. As the team grows, titles often include: Analysts and Associates (who do much of the initial deal screening and analysis), Senior Associates or Principals (who lead due diligence), and eventually General Partners (GPs) or Managing Partners (who make final investment decisions). Some firms also bring on “operating partners” or “entrepreneurs-in-residence,” who are part-time advisers or executives that support portfolio companies with their domain expertise.

Parallel to its internal hiring, a young firm builds its brand externally through signals like its name, board appointments, and early deals. The firm’s narrative — articulated in marketing materials and conversations — will highlight its mission, values, and differentiation. For example, Andreessen Horowitz famously emphasized its “platform” of value-add services (marketing, recruiting, technical support) from the start, setting a new model for VC branding. Meanwhile, lead investors often secure seats on startup boards or at industry events to gain visibility. Securing a few early wins (such as co-investing with more established firms or backing a promising startup that gets press attention) helps new firms demonstrate their network and judgment. Trust from entrepreneurs is critical: startup founders vet potential investors almost as much as investors vet them, so a new fund’s reputation (derived from its partners’ pedigrees and connections) is instrumental in attracting high-quality deal flow.

Fundraising and Limited Partners

Once a VC team is in place, raising a fund is the next major step. The firm will approach institutional investors (Limited Partners, or LPs) with a pitch deck, investment thesis, and track record materials in order to secure capital commitments. LPs come in many varieties: university endowments (e.g. Harvard Endowment), charitable foundations, corporate pension funds, sovereign wealth funds, fund-of-funds, family offices, high-net-worth individuals, and even corporations running corporate venture arms (CVCs) or government-sponsored funds. Each LP type has different motivations: an endowment may seek long-term returns and diversification; a pension fund looks for higher yields for retiree obligations; a sovereign fund may target strategic technology leadership; and family offices often blend financial returns with an interest in innovation. CVCs might invest partly for strategic insight into new markets or technologies, not purely for financial returns.

VC firms typically spend months on the fundraising roadshow. They provide LPs a data room full of due diligence materials: performance of previous funds, bios of partners, legal documents, market research, and so on. The firm conducts meetings with LP decision-makers, articulating its thesis (e.g. “We invest in early-stage fintech entrepreneurs in Southeast Asia leveraging our local market expertise”). Discussions cover fund size, fee structure, and governance. The firm negotiates a Limited Partnership Agreement (LPA) that legally binds the GP (General Partner) and LPs to the fund’s terms. Key LPA elements include the fund’s life (often 10 years plus extensions), management fee (commonly 2% of committed capital per year), carried interest (typically 20% of profits above a hurdle rate, though “no hurdle” is not uncommon in VC), GP commitment (often 1–2% of the fund to align interests), and provisions like clawbacks (ensuring any over-distribution of carry is returned if later losses occur). The LPA also addresses how capital is called: rather than transfer all committed capital upfront, the fund will issue capital calls over a few years as it finds investments. LP capital is typically “called” by drawing down commitments as needed for deals and fees. The fund’s governance includes forming an advisory board or LP advisory committee, which may handle conflicts of interest, approve key decisions, and liaise with LPs on matters like valuation policies.

Deciding the target fund size is strategic. A smaller fund (say $50M) can focus intensely on early startups and may boast higher percentage ownership in its deals, but must stick to seed-stage or small Series A investments. A very large fund (hundreds of millions or more) can participate in larger deals and support portfolio companies through growth rounds, but it may find it harder to invest small checks profitably. Large funds often segment into multiple “pools” (early stage vs growth stage) or raise sequential funds for different stages. In any case, the LP pitch must justify the fund’s size: growth-minded LPs want enough capital to capture big deals, while a boutique thesis might attract LPs preferring concentrated portfolios.

LP incentives differ from GPs’. LPs supply capital seeking returns, but they also require proper fiduciary safeguards. They care about the GP’s trustworthiness and alignment (which is partially secured by the GP commitment and the LPA terms). Most LPs will want quarterly reports showing capital called, invested, and distributed; valuation markups; and updates on portfolio progress. They evaluate fund performance on metrics like DPI (Distributions to Paid-In, or realized cash multiple), TVPI (Total Value to Paid-In, including unrealized value), and IRR (internal rate of return). Since VC realizations take many years, LPs often track TVPI and IRR closely, but in the end they value cash returns (DPI) above paper gains. LPs also pay attention to a fund’s “vintage year” (the year of first close) when comparing its IRR to peers, recognizing that economic conditions can skew comparisons. In recent years LPs have demanded more transparency in valuation methodologies (such as 409A and Fair Value mark assignments) to ensure standards are applied consistently.

Fund Economics, Structure, and Launch

The typical legal vehicle for a venture fund is a Limited Partnership (LP), set up in a jurisdiction favorable to private investment (such as Delaware in the U.S., or Luxembourg/ Cayman for international pools). The General Partner (often an LLC or LLCs managed by the firm’s principals) acts as the GP of the Fund LP, and holds the carried interest and management fee. Many VC funds have parallel structures (e.g. onshore/offshore LPs) to accommodate different LP tax needs. When fundraising, the firm negotiates successive “closes”: after an initial close (when enough LPs commit capital to begin investing), it may continue to market until a final close months later. Typically a fund will hold one or more interim closes to start deploying before 100% of the target is raised.

Once closed, the fund’s early days focus on deal sourcing and initial investments. In parallel, GPs draw up the fund’s legal and administrative infrastructure – this includes filing for any necessary regulatory registrations (e.g. SEC’s exempt reporting for VC advisers, or AIFMD notifications in Europe/India) and establishing compliance processes. Rules differ by region: U.S. funds under $150M can often avoid SEC registration, but larger ones register as investment advisers. In India, new Alternative Investment Funds must comply with the SEBI AIF regulations. Across all jurisdictions, GPs have fiduciary duties to the LPs: to act in the fund’s best interest, avoid conflicts of interest, and adhere to the fund’s mandate. Advisory boards (consisting of select LP representatives) may be formed to review decisions like extensions of fund term or transactions involving a GP or affiliate.

Capital is deployed over a few years (often 3–5 years of active investing after first close). GPs call capital in increments (“draw downs”) as they finalize deals, and hold reserves (typically 30–50% of committed capital) to follow-on investments in winning portfolio companies. After the investment period, the fund enters a harvesting phase, exiting companies over the remaining life of the fund. These phases are all spelled out in the LPA’s timeline, which usually allows some extensions if the GP needs more time to exit investments.

Management of the fund is financed through the annual management fee (commonly 2% on committed capital during the investment period, then 2% on invested capital afterwards, with step-downs over time). This covers salaries and operations of the fund. The GP earns no carry until LPs receive their invested capital back (the “preferred return” or “hurdle,” often 8%), after which profits are split (usually 80/20 in favor of LPs). If a fund underperforms, clawback provisions (triggered at final distribution) can force GPs to return excess carry to LPs. The economic terms thus balance incentives: GPs gain from “home runs” (their 20% share), but LPs are protected to recoup their capital first.

Fund size and economics also affect strategy. A smaller seed fund might charge a slightly higher effective fee (since fixed costs must be covered) and invest in dozens of small checks. A large, multi-stage fund might deploy hundreds of millions across fewer companies and will structure its fee and carry around larger fundraising that justifies building a big team. As the industry has matured, some firms have shifted to more flexible vehicles. For instance, new formats like “rolling funds” (quarterly subscription-based funds popularized by AngelList) allow managers to continually raise smaller amounts. But most institutional VC still follows the traditional LP/GP fund structure.

VC Operating Model and Team Roles

The day-to-day operations of a VC firm revolve around deal sourcing, diligence, deal execution, portfolio support, and fundraising. Hierarchically, a typical firm has General Partners (the decision-makers who oversee strategy and approve investments), followed by Principals or Vice Presidents who lead deals, Associates who evaluate opportunities, and Analysts who support research and tracking. GPs set the fund’s vision and often sit on portfolio companies’ boards. A fund might also include Operating Partners – experienced operators (often part-time) who help with recruiting key management for startups or providing domain expertise. Many firms now have dedicated “platform” teams focused on post-investment support functions: these can include marketing/PR, talent recruiting, business development programs, and community events for portfolio CEOs. The rise of such platform teams reflects founders’ expectations: top entrepreneurs increasingly look for more than capital, seeking firms that can actively help with hiring, partnerships, technical advice, etc. For example, a modern VC might boast a head of talent who sources executives for portfolio firms, or a community manager who organizes peer groups among founders[18][19]. The goal is to differentiate the firm and free up the investing team to focus on sourcing and due diligence, while centralized resources assist multiple companies simultaneously.

On the investment side, responsibilities are divided among the team tiers. Associates often maintain databases of startups and industry trends; they might attend conferences, scour accelerators, and chase leads. Principals bridge the gap between junior staff and partners, leading diligence on candidate deals (customer calls, financial analysis, technical assessments) and negotiating term sheets under partner supervision. The ultimate decision typically lies with the investment committee – usually comprised of one or more senior partners – which reviews deal presentations and either greenlights or rejects investments[20]. Effective communication across the team and with LPs/portfolio companies is key: many firms use CRM systems (like Affinity or Salesforce extensions) to track deal flow and maintain LP relations.

The culture within a VC firm is often collegial and network-driven. Team members are expected to cultivate relationships in the startup ecosystem – mentoring startup weekends, speaking at tech meetups, or even serving as angels themselves. As the VC industry has professionalized, firms also build more formal processes: standardized data rooms for diligence, legal and compliance checkpoints, and structured portfolio review meetings. Yet, nimble responsiveness is also valued; small teams must remain agile to move quickly on hot opportunities. In practice, many firms balance disciplined investment processes with “sprints” when needed to close a deal (for instance, due to competitive pressure).

Sourcing Investment Opportunities

Finding promising startups – generating “deal flow” – is the lifeblood of a VC. VCs leverage broad networks, industry expertise, and proactive outreach to build a funnel of potential investments. Sources range from personal and professional contacts (a very common source), alumni of startup accelerators (Y Combinator, Techstars, etc.), events (industry conferences, hackathons), direct inbound inquiries via the firm’s website, and relationships with startup founders themselves. Firms often cultivate ties with universities, research institutions, and technical communities to spot deep-tech opportunities early. Many also engage “scouts” – part-time connectors (often entrepreneurs or student partners) who tip the firm to new deals for a small carry share.

The quality of a firm’s deal flow strongly depends on its reputation and focus. A well-known firm can receive hundreds of inbound pitches weekly. One survey found that VCs are most likely to invest in companies referred by their own networks or other investors, with only about 10% of deals coming from completely cold outbound outreach[21]. In other words, warm introductions and mutual contacts carry more weight. This means a firm’s prior success and network can become self-reinforcing: high-profile wins attract more referrals from other founders and investors. Conversely, newer or smaller funds may struggle to get face-time with top entrepreneurs without established channels.

To manage deal flow, firms maintain a pipeline or “deal list” where every inbound lead is logged and evaluated at least superficially. Initial screening criteria might quickly filter out companies that clearly fall outside the fund’s stage or sector mandate. Promising candidates proceed to meetings with one or more partners. If interest is piqued, preliminary diligence commences (sometimes led by an Associate or Principal who asks for data rooms or executive summaries). The goal is to build conviction: assess the market opportunity, technology, founder team, and business model. If a deal still looks attractive, the team may arrange an investment committee presentation. Throughout, GPs often rely on conviction-driven approaches: they look for “champions” within the team who feel strongly a startup could be a breakout.

Due Diligence and Deal Execution

Once a startup is vetted and a term sheet is negotiated, rigorous due diligence is undertaken to confirm the opportunity and identify risks. VC diligence covers multiple dimensions. The market opportunity is quantified by TAM (total addressable market) analysis, competitive mapping, and customer discovery – validating that the startup’s target market is large and growing, and understanding how the startup’s offering stacks up. The product and technology are assessed: in software or hardware, partners may demo the product, test its scalability or differentiation, and even consult experts on the tech stack. For biotech or hardware, specialized consultants or prior-experience GPs examine clinical data, IP patents, or manufacturing processes. Team due diligence is critical: VCs reference-check the founders (talking to former colleagues or investors to verify character and competence) and evaluate whether the founders’ experience matches the startup’s problem (“founder-market fit”). Often, a stellar team can sway a deal; the adage goes that VCs will fund a great team with a so-so idea, but rarely vice versa.

Financial diligence involves building or reviewing detailed pro-forma models, understanding unit economics (e.g. customer acquisition cost, lifetime value), and stress-testing assumptions. VCs look at historical financials (if the company is post-revenue) for growth, burn rate, runway, and any unusual liabilities. The cap table is scrutinized: who owns what percent after the round, and are there any odd securities (convertibles, options pools) that might dilute new investors? Legal due diligence checks for outstanding litigation, IP ownership (especially if founders had prior ventures or university affiliations), and regulatory compliance (critical for fintech, healthcare, crypto, etc).

Throughout diligence, the VC aligns findings with the fund’s mandate. For example, an early-stage fund may prioritize different metrics than a growth-stage fund (the latter might require stronger revenue traction). If doubts emerge (e.g. a fragmented founding team or a crowded market), the team must weigh whether the potential upside still justifies investment. Ultimately, if diligence is satisfactory, the VC moves to finalize the deal structure.

Term Sheets and Negotiation

The term sheet is the blueprint of the investment, encapsulating the deal economics and governance terms. Typical elements include the investment amount and valuation (price per share and resulting ownership percentage), and the security type (usually preferred equity or SAFE notes for early rounds). The liquidation preference is a key investor protection: most U.S. VC deals have a 1× non-participating preference by default, meaning the investor must be paid their capital back (1×) before common shareholders receive proceeds, but they do not get to “double-dip” beyond converting to common shares[22]. VCs may negotiate for higher multiples or participating rights in very competitive rounds, but the standard has trended toward simpler 1× non-participating terms.

Anti-dilution provisions are common: they protect the VC if a future financing sells shares at a lower price. Nearly all VC deals include some anti-dilution clause, usually a “broad-based weighted average” adjustment[23]. This means if the startup sells a down-round later, the VC’s price per share is ratcheted down partially to mitigate dilution. The VC may also secure pro rata rights, granting the right (but not the obligation) to invest in future rounds to maintain ownership percentage. Governance rights in the term sheet will specify if the VC gets a board seat or observer rights, and any special voting provisions. For example, common provisions allow the VC to veto major actions (like changing the business, selling the company, issuing new stock, or taking on large debt) until their investment is returned. The term sheet also outlines the vesting schedule for any founder shares and typically includes a founder stock lock-up.

Negotiations between founders and investors revolve around these terms. VCs often write a draft term sheet based on market standards, then founders counter on aspects like valuation or specific rights. Experienced VCs use templates (for instance, the NVCA model term sheet has become an industry reference) to streamline this process. Once both sides agree on price and terms, the term sheet is signed (non-binding except for confidentiality and exclusivity clauses). This prompts the final documentation: a stock purchase or investment agreement, which legally binds the parties and incorporates the term sheet terms. The simplicity of terms can vary; for example, highly competitive deals often see founders conceding more investor-friendly terms, whereas in-strong-bargain deals founders can negotiate concessions. Throughout, smaller co-investors or syndicate partners may also weigh in or even demand pro rata shares. A “syndicate” co-invests alongside the lead VC; major syndicate members (like other top funds or strategic investors) might negotiate jointly or require certain protections.

Portfolio Management and Value Creation

After investment, the VC’s role shifts to governance and support. The GP or partner assigned to the company often takes a board seat or observer role, providing strategic guidance. VCs help portfolio companies recruit senior talent by leveraging their networks or even internally offered recruiting teams. They may facilitate customer or partner introductions, or suggest industry experts. On the operational side, firms often share best-practices (e.g. financial templates, technology tools) and hold community events for founders to exchange advice. Many firms pride themselves on a collaborative “platform”: for instance, Andreessen Horowitz developed an in-house HR team and extensive media support for its companies, while others host workshops on topics like growth hacking or international expansion.

The balance between hands-on support and respecting the founder’s autonomy is delicate. Successful VCs tread lightly: they provide counsel and open doors, but avoid micromanagement. Startups usually expect VCs to be partners, not pseudo-CEOs. If things go wrong (slowing growth or key hires failing), VCs must decide how deeply to intervene, which can range from bringing in operating partners to advising on an exit.

Co-investor dynamics also influence post-investment management. Syndicate partners may coordinate on board representation (e.g. sharing a board seat among two VCs) or share due diligence for later rounds. When raising follow-on rounds, the lead VC often offers pro rata participation to existing investors, allowing them to maintain ownership. The lead might also invite new investors into the round. These follow-on rounds are crucial – well-functioning funds reserve capital (typically 40–50% of fund size) to support winners. Trade-offs are made: if a company is performing, GPs will use reserves to double down. If underperforming, the VC faces tough decisions (often after around 4–5 years of investment). In some cases, a down round (raising at a lower valuation) may be needed. The VC must then negotiate dilutive or creative financing (like convertible debt or redemption of shares) to keep the company afloat. Rarely, a complete restructuring or sale for minimal value may occur. Venture investors accept these risks as part of the model – the handful of big wins will offset the losses.

Fund Deployment and Exit

Venture funds typically have a deployment (investment) period of about 3 to 5 years, after which the focus shifts to harvesting exits over the remaining term. Initial investments are often in smaller seed and Series A rounds. Over time, the VC will pace capital draws, ensuring not to run out of dry powder too quickly. Generally, a fund aims to deploy in a steady cadence: too fast may mean paying top-of-cycle prices, whereas too slow risks missing opportunities or lagging behind competitors. Especially in cyclical markets, timing is key – firms raised at market highs may struggle to deploy capital when valuations are elevated. Growth-stage funds (or “crossover” funds) emphasize deploying larger rounds in more mature startups and may hold much more capital per deal.

Exits come in several forms. The traditional route is an Initial Public Offering (IPO), where the company’s shares become publicly traded, allowing VC shares to be sold on an exchange (often gradually through lock-ups). Another common exit is an acquisition by a strategic buyer (e.g. a tech giant buying a startup). These trade sales can return capital to investors quickly. Increasingly, secondary sales – where an existing investor sells its stake to another investor (often a dedicated secondary fund or a late-stage PE) – have become prevalent. Secondaries allow liquidity before a traditional exit, though selling at a good price depends on the broader market’s appetite for private stake sales. Today’s secondary market is vibrant, sometimes offering partial exits to founders and employees as well.

When a company is liquidated or sold, the fund begins distributing proceeds to LPs according to the waterfall. LPs first receive their return of contributed capital and any preferred return hurdle. Then remaining proceeds are split: typically 80% to LPs and 20% carry to the GP (after any carry clawback adjustments). VC performance is often summarized by DPI (Distributions to Paid-In) and TVPI (Total Value to Paid-In, including unrealized value). Early in a fund’s life, TVPI may be high on paper from portfolio markups, but real performance only crystallizes when companies exit. Therefore, LPs scrutinize eventual DPI and realized IRR. High-profile successful exits can also raise a VC’s profile, aiding the next fundraise – a virtuous cycle known as the “exit-reinvestment feedback loop.”

It is worth noting that VCs have tended to emphasize TVPI in reporting, but after 2021’s market resets, many are highlighting DPI as the critical metric (paper gains are uncertain if valuations are falling). For example, NVCA data suggest that while median venture fund IRRs remain double-digits over the long run, the gap between TVPI and DPI underscores the risk that many gains are unrealized. Rigorous accounting is therefore crucial. VC funds typically mark portfolio companies at fair value (for instance, using the 409A method or pricing from recent financings) each quarter, in dialogue with LPs. When volatile markets hit, marks can be contentious – LPs may pressure for write-downs to reflect broader conditions, while GPs might resist overreacting to short-term swings. Transparency and prudent valuation practices build trust with LPs.

Reporting, Governance, and LP Relations

Maintaining strong LP relations is an ongoing task. After closing a fund, GPs are expected to communicate regularly with LPs through quarterly or semiannual reports. These typically include a capital account statement (showing called capital, fees, contributions, distributions, and residual value), an update on portfolio company valuation changes, and commentary on the fund’s status. Some firms also host annual meetings or call conferences with LPs. Transparency is paramount: LPs want to understand how GPs value startups (often based on recent rounds or revenue multiples) and how those valuations compare to market benchmarks.

Valuation methodology varies. For U.S. GAAP reporting, mark-up practices may follow ASC 820 “fair value” guidelines, whereas many European and Asian funds use IFRS or local equivalents. Startup valuations often have wide bands: for instance, a fund might mark a Series A company at $20M based on a recent round pricing, while another fund might use revenue multiples. Regulators and auditors sometimes scrutinize these marks, so firms usually justify changes thoroughly.

LPs also track fund performance via industry benchmarks. In venture, unlike public funds, there is no daily NAV to publish; performance is backward-looking. Prominent benchmarks include Cambridge Associates’ US VC index or Preqin’s VC fund quartiles. When a fund matures, LPs may compare the realized IRR against such benchmarks for that vintage. If GP’s track record is strong, it eases fundraising of the next fund; weak performance can dry up future commitments.

Governance features like Advisory Boards or LP Advisory Committees (LPACs) provide additional oversight. An LPAC – often composed of representative LPs – is consulted on conflicts of interest (e.g. a GP starting a side fund to invest in the same space) or major changes (like significant extensions to the fund’s life). These bodies act as fiduciary monitors beyond the legal LPA; they can signal to the GP how aggressive or conservative to be with valuations, conflicts, or governance.

Finally, adverse events like scandals, fraud, or legal issues in portfolio companies can strain LP relations. GPs must handle such crises by timely communication and, if necessary, legal action. Overall, professional VC firms prioritize investor relations as a strategic function nearly on par with deal-making – acknowledging that the continuity of capital depends on LP trust and satisfaction.

Case Studies in Venture Capital

Sequoia Capital (USA/Global): Sequoia, founded in 1972 by Don Valentine, exemplifies a firm that has continuously reinvented itself. Initially focused on Silicon Valley hardware, Sequoia’s early bets included Atari and Apple[3]. Over time it expanded into software and internet, funding companies like Cisco, Google, Instagram, Airbnb, and Stripe[3]. Its strategy has blended early-stage acumen with later-stage growth investments. In 2022 Sequoia raised roughly $9 billion across multiple funds (from U.S., Europe, Middle East LPs), reflecting massive capital inflow during the tech boom[24]. Sequoia’s organizational evolution is notable: in 2023 it formally split into three independent entities by geography (U.S./Europe, China, India/SEA) to manage regulatory and cultural differences, rebranding the China arm as “Hongshan” and India/SEA arm as “Peak XV”[24][25]. Each entity maintains close ties, but LPs now invest in region-specific vehicles. From LPs’ perspective, Sequoia’s brand and track record commanded immense trust and justified large commitments. From founders’ standpoint, Sequoia’s legacy meant heavy demand; startups courted Sequoia aggressively. Recently, geopolitical friction and regulatory concerns in China forced Sequoia to adapt its structure, illustrating how global dynamics now shape VC strategy.

Accel (USA/Global): Founded in 1983 by Arthur Patterson and Jim Swartz, Accel built itself on a “prepared mind” philosophy[26]. Its early claim to fame was spotting and scaling enterprise and internet companies. The firm famously invested $12.7M in Facebook in 2005 at a $98M valuation; that stake became worth around $8 billion by 2012[14] – a quintessential venture home run. Accel operates globally, with funds in the US, Europe (London office opened 2000), and India. It has a track record across stages: seed to growth. In 2024–25 Accel continued expanding, raising dedicated funds (for example a $650M early-stage fund for Europe/Israel, and another $650M for India/SEA[27]). The firm focuses on enterprise software, consumer internet, and fintech. LPs have viewed Accel as a reliable, though occasionally less flashy, performer; its strategy of “going deep” on market understanding has earned consistent returns. Founders see Accel as a steady partner – for instance, Accel’s investment in Slack and Atlassian in early rounds reflects its strength in SaaS. Accel’s ability to scale its operations across continents while maintaining a clear thesis illustrates how an early VC firm can grow to global scale.

Andreessen Horowitz (a16z, USA): As a more recent model, Andreessen Horowitz was launched in 2009 by Marc Andreessen and Ben Horowitz, who were themselves veteran tech founders[28]. From its inception, a16z drew attention by promising a new approach: deploying very large funds across all stages, building a large support “platform,” and investing in a wide range of tech sectors. A16z rapidly raised capital (first two funds of $300M and $650M by 2010[29], later tens of billions more). By mid-2024, it managed around $42–46 billion[28][30], making it the largest U.S. venture firm by AUM. Its strategy has been to back market leaders in emergent categories (social media, crypto, biotech, etc.), and it has the firepower to lead late-stage rounds that smaller firms cannot. For example, A16z made headlines with its early investments in Skype and Twitter[31][32], and later in companies like Coinbase (crypto) and Palm. A16z’s case illustrates a trend: some newer mega-funds treat venture like a broad, institutional asset, adding layers (e.g. public marketing teams, content studios, community groups) to attract entrepreneurs. From LPs’ perspective, A16z became a must-have partner – a top-tier name that validates their portfolios. For entrepreneurs, A16z’s brand is polarizing: many value its resources and outsize check-writing ability, while others critique that such large funds can’t meaningfully engage in dozens of companies at a time. Regardless, A16z’s rise shows how venture firms have become large-scale organizations, not just small partnerships.

Tiger Global (USA/Global): Originally founded in 2001 by Chase Coleman as a hedge fund, Tiger Global has become a leading late-stage venture investor. Distinct from traditional VC, Tiger operates as both a hedge fund and private equity fund, investing in publicly traded tech companies and in late-stage startups worldwide. From 2007–2017 it raised more capital (via venture rounds) than any other VC, reflecting its aggressive strategy[33]. Tiger’s model was to identify high-growth companies even at frothy valuations, and back them with speed. In 2022 it raised a $12.7B early-stage fund, showing LP demand[34]. However, its performance has been volatile. While Tiger earned top returns for LPs in bull years (for instance, $10.4B in 2020[35]), it also faced massive losses during market downturns (by June 2022 its flagship hedge fund was down ~52% YTD[36]). Its venture funds saw smaller declines (~9% in Q1 2022)[37]. As markets rebounded, Tiger recouped some losses (reporting +24% returns in 2023[38]). LPs in Tiger funds thus experienced a very different ride than typical VC: higher peaks and deeper troughs. Tiger’s success in sourcing deals across the globe (notably India and China tech firms) and its willingness to write very large checks has influenced VC norms – many credit Tiger with driving up late-stage valuations. Founders often coveted Tiger’s capital and connections but some later lamented the volatility and quick-to-exit mindset of such investors. Tiger Global exemplifies the crossover phenomenon: a fund blurring hedge, private equity, and venture boundaries, showing how LP demand for tech returns fuels ever-larger vehicles.

SoftBank Vision Fund (Global): The SoftBank Vision Fund launched in 2017 as a dramatic new scale in venture investing. Spearheaded by Masayoshi Son and funded by SoftBank and partners (Saudi PIF, Mubadala, Apple, etc.), the $100+ billion fund was billed as the world’s largest technology investment fund[39]. Its thesis was to back the leading AI-powered startups across sectors. With huge war-chests, Vision Fund made headline deals in Uber, WeWork, Arm, and others. Initially, its size and longevity allowed it to invest massive capital into a single company (e.g. SoftBank ultimately owned significant portions of multiple unicorns). However, Vision Fund also demonstrated the perils of ultra-large bets: it suffered an $18 billion loss by 2020 due largely to high-profile write-downs (most famously WeWork)[40]. Activist investor Elliot Management even pressured SoftBank to become more transparent. Yet Vision Fund also scored big winners: it staged a record $37B profit by early 2021 thanks to portfolio hits like Coupang[41]. By 2024, SoftBank was raising a smaller ($30B) second fund, relying primarily on its own capital. The Vision Fund’s impact on VC has been profound: it raised expectations for large tech valuations and showed that non-traditional players (sovereigns, corporates) could dominate venture. For LPs (mostly SoftBank itself), the Vision Fund was an experiment in scale: delivering partial validation of VC as an asset class but also warnings about the difficulty of deploying enormous capital responsibly. Founders saw SoftBank’s capital as transformative (big funds for growth) yet sometimes as disruptive (SoftBank’s preferences occasionally led to winners and losers in its portfolio).

Nexus Venture Partners (India): Launched in 2006 by Naren Gupta (ex-Patni/Sequoia India) and co-founders, Nexus was one of India’s first Indo-US cross-border funds. It focused on early-stage tech across India and the U.S., leveraging its founders’ Silicon Valley ties. Nexus’s brand grew rapidly after backing companies like Zomato, Snapdeal, and Unacademy[42]. As an India-focused firm, Nexus had to educate global LPs about the emerging Indian market, while also competing with U.S. firms entering India. Its global strategy involved co-investing with top U.S. VCs for U.S. startups (taking advantage of the founders’ networks) and similarly introducing Silicon Valley best practices to Indian startups. Over time, Nexus raised multiple funds, maintaining a reputation for disciplined investing. LPs in Nexus had to trust the team’s cross-cultural expertise. For startup founders, Nexus became a sought-after lead investor due to its experience and ability to open doors both domestically and internationally. Today, Nexus remains a key player in Indian VC, bridging two ecosystems.

Blume Ventures (India): Founded in 2011 by a group of Indian entrepreneurs and investors (including Rajul Garg, Karan Mohla, and later Mamoon and Ankur Mittal), Blume became known for seed-stage investments in Indian tech startups. It embraced the “universe of early stage” before the term micro-VC was popular. Early bets included companies like CureFit, Dunzo, and HealthifyMe. Blume’s strategy was to invest very early (often pre-revenue) with small checks, taking on high risk with the expectation of backing outsize successes. The firm’s stakeholders – LPs ranging from family offices to policy-oriented investors (e.g. SIDBI) – were aligned to this thesis. Blume also emphasized founder support and community: it created “Blume School” events and internal share pools to incentivize its team. Organizationally, as its assets grew, Blume eventually spun out some team members into related funds (for example, Z Nation Lab formed out of Blume’s incubator programs). Today, Blume is viewed as a pioneer of India’s seed stage, helping spawn the country’s first wave of homegrown unicorns.

Elevation Capital (India, formerly SAIF): SAIF Capital, now Elevation, was founded in 2002 by Ravi Adusumalli[43]. It grew by targeting later-stage Indian tech bets like Paytm, Swiggy, and Unacademy. In 2022 SAIF rebranded to Elevation Capital, signaling a refreshed global identity. Its strategy over time moved upmarket: early on it did some seed deals, but later mostly invested growth capital (Series C/D) into startups with proven traction. Elevation also had a U.S. presence to back globally aspiring companies. LPs in SAIF/Elevation benefitted when big Indian IPOs and acquisitions (Flipkart-Walmart, Zomato IPO) happened. Conversely, like others they navigated challenges of market swings (deceleration after 2021). Elevation’s evolution from small India fund to transnational multi-stage player illustrates how mature emerging-market firms adapt – raising larger funds, partnering with strategic backers, and expanding mandates as their reputation solidifies.

Peak XV Partners (India & Southeast Asia): Peak XV (formerly Sequoia India & SEA) traces its lineage to the India arm of Sequoia, which began operations around 2006. In 2023, this unit was renamed Peak XV as part of Sequoia’s global reorganization[44]. Over roughly 17 years in the region, Peak XV raised 13 funds totaling over $9 billion[45] and invested in some 400 companies. Key portfolio successes include Zomato, BYJU’S, and Cars24. Peak XV’s perspective combined local market knowledge with Sequoia’s global playbook. Its narrative emphasizes founder empowerment – even its name Peak XV (the old name for Everest) symbolizes bold ambition[46]. LPs committing to Peak XV typically include a mix of domestic high-net-worth families, family offices, and institutional capital interested in India’s growth. For Indian entrepreneurs, Peak XV offered the prestige and network of a storied international brand. Organizationally, Peak XV built offices in Mumbai, Delhi, Bangalore, and beyond, reflecting a broad reach. Its investments spanned very early to growth stage; for instance, it led seed rounds in tech startups while also participating in massive pre-IPO rounds.

These case studies illustrate VC’s diversity. Sequoia and Accel show how firms can endure across decades through global reach. Andreessen Horowitz and Tiger Global highlight newer models: massive, multi-strategy funds chasing scale. SoftBank’s experiment demonstrated the impact of sovereign-sized capital. The India examples (Nexus, Blume, Elevation, Peak XV) show how regional fund managers blend local insight with global practices. Across all, the perspectives of LPs (seeking alpha), GPs (seeking both returns and ecosystem influence), and founders (seeking capital plus support) interact: a top fund’s success hinges on aligning those interests.

Ecosystem Interactions

Venture capital does not operate in isolation; it is deeply intertwined with the broader startup ecosystem. Angels – wealthy individuals or mini-funds – often pre-seed startups and hand them off to VCs as they grow. Accelerators and incubators (like Y Combinator, Techstars, 500 Startups) act as deal generators: a graduate company from YC typically enters the fundraising pipeline of multiple VCs the following year. Many VC teams participate in these programs as mentors, keeping a finger on emergent trends.

Corporate venture capital (CVC) arms also play a strategic role. Companies like Google, Intel, and Disney run VC-like units to invest in startups that might align with their business interests. CVCs often co-invest with traditional VCs, though their goals can differ (some care more about partnerships than pure return). Collaboration between top-tier VCs and CVCs is common: for example, a tech conglomerate’s VC arm might invest alongside a VC in an AI startup, providing market access alongside capital.

Governments and development agencies also engage with VC. Many countries create funds-of-funds or direct support to encourage VC investing domestically. For instance, Singapore’s Temasek and GIC are major VC investors, and India’s SIDBI and Atal Innovation Mission have launched VC initiatives. This public-sector capital can bolster nascent ecosystems by taking first-loss positions or matching co-investment.

Syndication – where multiple VCs invest together in one round – is a standard practice, especially for Series A and beyond. Syndicates can include a lead investor plus other funds joining, or even angel co-investors. In hot deals (e.g. a very promising startup), VCs may compete fiercely to join the cap table, sometimes forming pre-round alliances. Alternatively, in cooler markets, firms might intentionally co-invest to share risk.

VCs also cooperate through industry associations and standard-setting bodies (like NVCA in the U.S. or Invest Europe). These groups collect industry data, lobby for favorable policy, and set standards (e.g. model term sheets or ESG guidelines). For example, venture associations may meet regulators to explain startup financing issues in new legislation.

On the other hand, VCs sometimes compete directly – particularly for a limited pool of best startups. Top-tier firms jockey for “scoop” in hot batches (only one lead slot available in an oversubscribed round). This competition can drive up valuations. The interplay of syndication and competition is nuanced: firms may quietly collaborate on deal diligence while publicly vying for equity.

Angels and accelerators often feed startups to VCs; government funds may co-invest alongside VCs or catalyze VC formation. Secondary market players (e.g. specialized funds or liquidity platforms) are now part of the ecosystem too, providing exit opportunities. In sum, venture capital exists within a network that includes angels, accelerators, corporates, governments, and secondary buyers – all interacting in supporting startup growth and providing capital liquidity.

Risks and Criticisms

Venture capital, while celebrated for its role in innovation, faces notable criticisms and inherent risks. One major issue is cyclicality and overvaluation. Bulls argue that periods of abundant cheap money have inflated startup valuations to unsustainable levels. Indeed, after the 2021 boom, many companies faced sharp down-rounds or write-downs. Critics warn that an inflated “unicorn bubble” poses systemic risks (though historically, VC hasn’t shaken the whole economy, it has imposed heavy losses on specific funds and LPs). Another concern is the power imbalance with founders: sophisticated VCs often have leverage to impose onerous terms on young companies, which can stifle entrepreneurship. Issues like excessive liquidation preference stacking, ratchets, or onerous protective provisions have drawn scrutiny as being unfair to founders and employees.

Adverse selection is an intrinsic risk: VCs must pick among extremely risky ventures, and by design most will fail. The industry’s famed “10% return on capital” depends on 90% of deals failing and 10% yielding huge returns. This skew can tempt some firms to gamble. Concentration risk is another critique: VC dollars have tended to cluster in certain sectors (e.g. software, AI, fintech) and geographies (Silicon Valley, Beijing, Bangalore). Regions and industries outside these hubs often struggle to attract VC attention.

Diversity and inclusivity have become prominent criticisms. Historically, VC is dominated by certain demographics (e.g. in the U.S., over 80% white and 90% male among decision-makers). As a result, many argue that female entrepreneurs and minority founders get under-capitalized. The industry has responded by creating diversity initiatives and funds targeting underrepresented founders, but progress is still debated.

Environmental and social concerns also touch VC: given the focus on tech disruption, critics question whether VCs sufficiently consider social impact or ESG issues (sometimes seeing a culture of “move fast and break things” that can externalize harms). Another debate involves geopolitical aspects: for example, some U.S. policymakers have looked at foreign VC funding of tech (especially AI chips) as a potential national security issue.

Finally, there is a tension between LPs and GPs on fundraising pace. As funds grow larger, some lament that VCs increasingly resemble mini-PE firms, focusing on financial engineering rather than hands-on mentoring. The rise of “rolling funds” and micro-VCs counters this trend by emphasizing smaller, focused funds with closer founder engagement, but it also reflects a fragmentation of the traditional VC model.

Future Outlook of Venture Capital

Looking ahead, venture capital is poised to adapt to both opportunities and challenges. Technological shifts are key drivers. Deep tech areas – particularly artificial intelligence, climate tech (renewables, carbon tech, agriculture), biotech, and quantum – are attracting record attention. VC firms are raising specialized funds to capture these waves; for example, many VCs in 2023–2024 raised dedicated AI or climate funds. The maturation of technologies like generative AI (as of 2025) suggests a new startup renaissance, potentially changing what “software” means and spawning companies we can’t yet predict.

Geographically, VC continues to globalize beyond its Silicon Valley roots. Emerging markets in Africa, Latin America, and Southeast Asia are receiving growing capital, albeit from smaller ecosystem sizes. Mainland China’s VC ecosystem is one of the world’s largest and may rival Silicon Valley in total deal volume. India’s ecosystem is also expanding rapidly. As noted, the U.S. share of deals is no longer dominant[8]. Coupled with remote work and more connected global markets, some U.S. VCs are scouting beyond home turf more than ever, and LPs are backing international funds.

LP appetite will shape the industry. After the post-pandemic surge of capital into VC, some LPs have become cautious, emphasizing fund discipline and fees. Yet many remain committed to VC’s growth prospects, especially younger LPs (e.g. new sovereign funds, university endowments with long horizons). Some innovative LP models are emerging: “direct investment” by LPs in VC deals, or private VC “funds of one” managed by a single institutional LP with external advisors.

Regulatory scrutiny may increase. Both in the U.S. and abroad, regulators are paying more attention to the private markets. Securities regulators are examining how VC funds are marketed and how valuations are set. Data privacy and monopoly concerns could affect certain startups (e.g. EU’s GDPR developments or U.S. antitrust enforcement may impact portfolio companies). Additionally, the concept of tokenization looms as a possibility: there is ongoing experimentation with blockchain-based fund structures (“tokenized funds”) that could increase liquidity or fractional ownership, though legal frameworks are still catching up.

Secondary markets for private shares are becoming more mature, which may change exit dynamics. Firms like EquityZen, Forge, and Even have enabled employees and early investors to sell private stock, so exit liquidity can arrive before formal IPO/acquisition. This could alter VC’s time horizons. At the same time, new vehicles like SPACs (special-purpose acquisition companies) have had mixed popularity but remain an exit option.

Finally, globalization of trends (like remote work enabling more startups anywhere) suggests VC might decentralize further. Cloud infrastructure and software tools let small VC teams operate globally. Some expect that micro-VCs and individual angel “supersyndicates” will continue to proliferate, making early-stage capital widely accessible.

In summary, venture capital will likely remain a central but evolving pillar of global finance. While the tools and markets may change, the core spirit – supporting visionary entrepreneurs with capital and counsel in hopes of outsized returns – will endure.

Glossary

Carry (Carried Interest): The share of fund profits paid to the General Partner (typically 20%). If a fund earns profits above the LPs’ capital return (and any preferred return), 20% of those profits go to the GP as performance incentive.

Co-investor: An investor who participates alongside a lead investor in a funding round, often on similar terms. Co-investors share the risk and help fill out a round beyond the lead VC’s allocation.

Conviction: A strong belief by an investor in a startup’s potential. Deal decisions often hinge on one or more team members having high conviction.

Dry Powder: The amount of committed but unallocated capital in a fund. VCs maintain dry powder to participate in follow-on financing rounds for their portfolio companies.

DPI (Distributions to Paid-In): A performance metric for private funds. It is the total cash and stock distributed to LPs divided by the total capital they have paid into the fund. A DPI >1.0 means LPs have received back more cash than they invested.

Fundraising Close (First/Final): Points in the fundraising timeline. The first close is when the fund first accepts commitments and can start investing. The final close is when all commitments (target size) are secured and no more LPs are added. Funds often have multiple interim closes.

General Partner (GP): The managing entity of a venture fund (often an LLC). General Partners (or Managing Partners) run the fund and make investment decisions. They owe fiduciary duties to LPs.

Investment Committee: A panel, usually comprising senior partners, that reviews and votes on proposed investments after due diligence. Their approval is typically required to finalize a deal.

LPA (Limited Partnership Agreement): The legal contract between the VC fund’s General Partner and the Limited Partners. It outlines all economic terms and governance of the fund (fees, carry, fund life, etc.).

Limited Partner (LP): An investor in a VC fund (e.g. institutional investors, family offices). LPs commit capital but do not manage investments. Their liability is limited to their commitment.

Liquidation Preference: An investor provision that dictates the order and amount to be paid out in a liquidation event (sale or IPO). A 1× non-participating preference means the investor must get at least their invested capital back before common shareholders, but cannot “double dip” after converting to common.

NAV (Net Asset Value): The current net worth of the fund, calculated as total portfolio valuations plus cash minus any liabilities. NAV is often reported to LPs quarterly.

Pro Rata Rights: The right for an investor to participate in future financing rounds to maintain their ownership percentage. For example, a VC with 10% of a company may get pro rata rights to invest in subsequent rounds up to 10% of the new round.

SAFE (Simple Agreement for Future Equity): A financing instrument often used in very early-stage rounds (especially in Silicon Valley). It is a form of convertible security that converts into equity at a later priced round, without setting a share price upfront.

Syndicate: A group of investors who collaborate to fund a company in a given round. Often one VC leads and others follow. Syndication spreads risk and brings more capital.

Term Sheet: A non-binding summary of the key terms of an investment deal (valuation, amount, securities, rights, etc.). It forms the basis for drafting the definitive investment agreements.

TVPI (Total Value to Paid-In): A metric representing the total value (realized + unrealized) of a fund relative to the capital invested. TVPI = (Residual value in fund + Distributions) / Paid-in capital. It reflects both exit proceeds and paper portfolio value.

Venture Capital (VC): Equity financing provided to early-stage, high-growth companies. VCs take on higher risk for potentially higher returns, often providing strategic guidance to portfolio companies in addition to capital.

References:

[1] [2] Venture capital - Wikipedia

https://en.wikipedia.org/wiki/Venture_capital

[3] [24] [25] [44] [45] [46] $9 Billion Peak XV Partners (Previously Sequoia Capital) to Raise $1.2 billion to $1.4 billion in 1st Fund Launch Since 2024 Split into 3 Entities with Sequoia United States & Europe, HongShan for China, and Peak XV Partners for India & Southeast Asia, Sequoia Capital Managed $85 Billion AUM in 2022 | Caproasia