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Introduction

Would you like to be in a job where you listen to exciting business proposals, meet lots of interesting people, and are exposed to latest cutting-edge concepts and ideas?
A field where you earn huge returns and also earn the gratitude of your clients for funding them. Then a career in private equity and venture capital may be the right one for you. Behind every recently successful company like Google, Yahoo!, Facebook, behind every successful entrepreneur is a venture capitalist who made the correct call in funding that idea.

Venture capital is a type of investment provided by external professionals into new, high-growth companies. The investment is in the form of cash in exchange for shares in the company. A venture capitalist is the person making the investment while a venture capital fund is a pooled investment vehicle often in the form of a partnership that invests the capital of third-party investors into investments that are considered too risky for normal financing like equity or bank loans. Venture capital also includes professional managerial advice as well as using networks and contacts of the professional investors to get business for the company.

Types of Private Equity & Venture Capital

There are multiple forms of private equity or venture capital. These are primarily classified based on the stage the company is in.

1. Angel Investors - Seed Capital - Angel investors who are less of investors and are primarily helping out very early stage companies to start operations. Generally, these investments are done by wealthy individuals who have been entrepreneurs, or even by funds for socially useful projects.

2. Early Stage Investors - This is at a stage where company just has a core team, a business idea, and operations are just beginning. Early stage investments by Venture Capital funds generally become very profitable as they get much more chunk of equity at this stage.

3. Private Placement or Strategic Investors - This is done by established companies when they need to raise funds for projects but without taking funds from the general capital markets. Instead, they dilute equity to professional investors in return for money.

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* Ajay Ohri is an alumnus of IIM Lucknow, and has worked with some of the largest BPOs in India (including two BPOs listed on NYSE).
Currently, he is running his own database consulting firm, and is the founder of his website business
http://decisionstats.com.
The views expressed in the article are his personal views.
Article posted on August 4, 2008.