What Is A Venture Capitalist And Why Do We Need Them In Tech?

If you’ve ever thought about creating a startup or looking for investors, chances are you’ve heard of the term Venture Capitalist (VC). But what are VCs and why is their role important in the tech industry?

A Venture Capitalist is an investor that provides capital to startups with a high potential for growth. The VC industry has been around for a while. But it only recently gained prominence in the tech industry!

So let’s dive into venture capitalism, and how it contributes to the industry!

What Do Venture Capitalists Do?

A Venture Capitalist provides the seed money that helps startups get off the ground. This arrangement allows startups to obtain the funding they need to get started.

In exchange, this gives VCs the opportunity to make a lot of money if the startup is successful. But they also risk losing their investment if the startup fails. VCs are usually employed by firms, but there are also a number of independent investors.

Why Do We Need Venture Capitalists in Tech?

The tech industry is much more capital-intensive than other industries. Basically, it’s the epitome of the saying you need to spend money to make money.” This is because developing new technology constantly requires a lot of money. Since your tech is the product, it’s a must to start your business. Without a product, you’d have nothing to sell. Duh. 

Without VCs, many startups would never be able to get started. Or push through critical growth periods starting out.

The tech industry is very risky. Many startups fail. This is for many reasons, including the fact that the industry is changing quite quickly. It can be hard to keep up, especially when developing and marketing a new product. Therefore, a Venture Capitalist will need to be willing to lose their entire investment or at least a large portion of it. That’s a big ask of someone. 

This risk is offset by the fact that VCs usually take a minority stake in the company. This means that they stand to make a lot of money if the startup is successful.

Risk and reward go hand-in-hand for a VC.

What Kinds of Companies Does A Venture Capitalist Invest In?

A Venture Capitalist will typically invest in companies at the seed stage. These are companies that are getting started and haven't yet launched their product. Think of terms like - Seed Funding, Seed Extensions, and Series A.

They may also invest in companies at an early stage as they start to grow. This is when startups start to generate revenue but are still far from profitability. That being said, some VCs will also invest in later-stage companies. These are companies that are further along in development. Think of terms like - Series B, C, D, etc.

How do Venture Capitalists Help Startups?

Aside from investing money into the tech industry. They also offer advice and mentorship to startup founders. VCs have the experience to provide guidance to startups when it comes down to making business decisions on things like managing finances, growing the brand, etc.

This can be beneficial for new business owners and tech developers who are looking to carve their own path in a new industry. A VC can also connect you to others in the industry and help you grow your network. This is invaluable when you’re starting out.

Examples of tech companies that grew from VC investments include:

• Facebook
• Google
• Twitter
• Uvaro

Learn more about tech sales with Uvaro

So there you have it! Now you have a broad overview of what venture capitalists do. When it comes to tech, these are some of the most important players around. So if you're interested in starting your own tech company, remember to reach out to VCs and craft that pitch! This is where knowing how to sell pays off in spades!

Wondering how to develop those skills? We’ve got you covered! Our Workshops, Courses, and Coaching offerings have all been developed to help you find Career Success in the tech industry. Check out our Career Success Catalog to learn more.