What is Internet Venture Capital?

A. Leverkuhn
A. Leverkuhn
Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

Internet venture capital is money that wealthy individuals or groups make available for Internet startups. Those fledgling companies that require venture capital to grow their businesses will look for investors offering “Internet venture capital,” and make deals regarding the exchange of future ownership equity for cash. Getting Internet venture capital is a common part of growth funding for a new business related to information technology or online operations.

In exchange for a payout from a venture capital fund, the investors will be looking for an acceptable yield, often in the form of a high return on investment, or ROI. Alternately, the venture capitalist might look for a larger stake in the company in order to profit from its future expansion. Beginning Internet business owners have to make complicated decisions about how they would trade future possibilities to get the startup capital that they need. Some might seek out fixed rate loans rather than bartering away a lot of their upside just to get started.

One kind of Internet venture capital is called a “series A round.” This specific type of startup capital is often composed of a type of preferred stock. Finance pros refer to a “Silicon Valley model” that may provide the basis for a conventional business path or plan. In this model, a “series A round” might provide enough money for a business to function for several months, by which time the business leaders may have arrange for other kinds of intervention in the form of additional venture capital.

Some of the individual investors who provide Internet venture capital are called “angel investors.” Finance pros have started using this as a common term for the people who are willing to put their own money into Internet startups with good faith agreements about profit sharing in the future. Some angel investors will ask for ownership equity, so that they effectively own a large part of the company, and acquire the creative control that comes with that status. Others will seek a high-yield bond where the company pays a high rate of interest on their debt. Either of these philosophies represents a different strategy by venture capitalists to effectively profit from their lending.

Regardless of where the money comes from, efficient and responsible use of Internet venture capital is one of the key hallmarks of a successful entrepreneur. Anyone who does not pay attention to returning value on this funding, can quickly lose their business and any accumulated capital. Following venture capital, and being responsible with it, distinguishes those who know, not just how to fund a business, but how to make it profitable in the long term.

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