Context:
Retail investors in India are increasingly shifting toward bond investments, prompted by volatile equity markets and plateauing fixed deposit (FD) rates. This trend is reshaping the investment ecosystem and drawing attention from venture capital (VC) firms.
What Is Venture Capital (VC)?
- Venture Capital (VC) is a form of private equity financing provided to startups and small businesses with high growth potential.
- VC firms invest in exchange for ownership equity in the startup.
- It is especially useful when a startup cannot raise funds through capital markets, bank loans, or traditional debt instruments.
Types of Venture Capital
| Stage | Description |
|---|---|
| Pre-Seed Stage | Earliest phase, focused on turning an idea into a business plan; often supported by incubators/accelerators. |
| Seed Funding | Helps startups launch their first product; usually no revenue yet, relies heavily on VC. |
| Early-Stage Funding | Required to scale production, expand marketing, and sales; divided into Series A, B, C rounds, etc. |
Difference: Venture Capital vs. Private Equity
| Parameter | Venture Capital | Private Equity |
|---|---|---|
| Target | Startups | Mature businesses |
| Risk | High | Moderate to low |
| Ownership | Minority stake | Often majority control |
| Focus | Innovation and growth | Restructuring and profitability |
