Venture Capital Industry Profile

The US venture capital industry includes about 850 active firms with more than $250 billion in investments under management, according to VentureSource. Major companies include Accel Partners, Draper Fisher Jurvetson, Kleiner Perkins Caufield & Byers, Matrix Partners, and Sequoia Capital. The industry is fragmented: the top 50 companies invest about one-third of venture capital dollars.

COMPETITIVE LANDSCAPE

Demand is driven primarily by the pace of technological innovation and the number of companies created to commercialize new technologies. The profitability of individual companies depends on successfully choosing and managing a portfolio of investments. Large companies have advantages in attracting investors, developing expertise in multiple technology markets, and funding large deals. Small companies can compete effectively by concentrating on specific market sectors or geographic areas.

Individual, or angel, investors, and large companies with strategic interests in early-stage companies are also sources of new venture funding.

PRODUCTS, OPERATIONS & TECHNOLOGY

Venture capital companies provide money to young, rapidly growing companies with promising new products or services in exchange for ownership in the company. Major market sectors for venture capital investments include software; life sciences (including biotechnology and medical devices); telecommunications; media and entertainment; and clean tech (energy and environmental technologies).

Venture capitalists (VCs) create pools of money, or funds, by raising capital from pension funds, endowments, foundations, corporations, foreign investors, insurance companies, and high net worth individuals. A firm may operate several funds simultaneously.

Venture capital firms are organized as limited partnerships, ...