An Overview of the Venture Capital Investment Process

The completion of a successful venture capital deal requires the deal to progress through a multistage process. This process is no easy task, as venture capitalists face a number of unique challenges along the way. First, it is up to venture capitalists to educate the young entrepreneurs who often confuse venture capital with other types of financing. The initial interactions between the two sides are difficult, as venture capitalists must fill the dual role of educator and negotiator. Second, entrepreneurs are often not prepared to receive venture capital. They may not have any formal documentation describing their business, and may not have prepared business plans or financial forecasts—the cornerstones of venture capital evaluation. Third, the process of structuring and negotiating venture capital deals is inherently difficult—a fact that is especially true for first-time venture capital recipients.