Types of Venture Capital

A graduate of Bentley University, certified public accountant Kate Merli works as CFO at New 2nd Capital, where she oversees employee payroll and benefits, manages fiduciary account cash flows, and maintains cash flow planning for each fiduciary account. Through her years of professional experience, Kate Merli has developed a wealth of experience in different areas, including venture capital.

Startup businesses that may potentially flourish require an investment. Looking at the long-term growth, investors put in their money into such businesses. The capital invested is called venture capital, while those that invest their money are known as venture capitalists. 

Venture capital is categorized based on the stage of business when the investment is made. Its three main classifications of funding include early-stage financing, expansion financing, and acquisition or buyout financing.

Early Stage: Divided into three phases, this stage involves seed funding, startup funding, and first-stage funding. In the first phase, an entrepreneur receives a small amount as his or her startup loan. The second phase entails an amount given for the purpose of expanding or completing a product or service development. The third phase takes place when companies need to finance their initial business activities but have used up their starting capital.

Expansion: This type of venture capital is divided into two types: second stage and bridge funding. Second stage funding is intended for companies that are moving towards growth or expansion. Bridge funding comes as a finance option with a small-term interest for the purpose of major business strategies such as initial public offers. 

Acquisition or Buyout: This is also composed of two types, acquisition funding and management funding. The former discusses acquiring a portion or an entire company. The latter talks about obtaining a specific product from another company.