What is Venture Capital?
Venture capital, also known as VC. It is a private investment fund .They invest money in ventures in which the risk assessment is high. In anticipation of high returns in case of their success. Venture capital funds are an accepted and common way of raising capital for the purpose of investing in start-up companies (“start-ups”) in the high-tech field.
Venture Capital Fund – Investment Strategy
VC funds raise their capital from institutional investors. Namely, banks, pension funds and study funds. While private investors (angels) also contribute their share. When capital is raised, there is no entry for new investors and no exit for existing investors. Most funds invest relatively small amounts. Which are scattered among a large number of companies. Equally important, that they are in one of the first three life cycles. – Specifically, the Seed stage, the Early Stage stage and the Growth Stage stage. The average investment period ranges from 7-10 years. During which the fund managers receive management fees worth 2.5% of the investors’ money. At the end of the investment period between 15-25% of the profits of the company being sold, are divided between them and the investors.
The oldest law in the game says – ‘Investing in a company that is in the early stages of its life will issue a more profitable stock in the future’. This is in fact the guiding principle of venture capital funds. They entered this game for the high return. If not for that, then it’s not worth the risk. And the risk is great. Funds operate under conditions of uncertainty .A statistic shows that out of 100 companies invested, less than 10 of them will be profitable enough for the funds. This is the same ‘risk’ that hides behind the threatening model name. But behind it also hides the chance of a big profit, because one right investment, in the right company, is enough to force the rest.
Israel Start-Up Nation
The establishment of start-up companies in Israel has turned from a delightful phenomenon into an economic trend with a strategic essence. About dozens start-up companies are set up every month. Companies such as Check Point, Monday.Com, Wix, Lemonade,Jfrog are examples of success. These are companies that were established only a few years ago and today are leaders in their field around the world. This reality inspires the younger generation and many others and exemplifies it.
Not all start-ups are successful, a third will close without any income, a third will return part or all of the investment through business or sale / merger, and a third will generate profits, but only two companies from the last third will generate very large profits (usually By offering or selling to a major strategic entity).
The scope Israel venture capital
We the rise of many startups in Israel, we also see a rise in venture capital firms. Looking to have a portfolio of companies in multiple industries.
Such as, Mobility, Saas, Cyber- Security,Fintech and more.
There are several dozen venture capital funds operating in Israel, including NFX Capital, Maniv Mobiliy , Random Forest Capital and more. As well as foreign venture capital funds that invest in Israeli companies. In 2018 alone, 30 new venture capital funds were established in Israel, raising a total of approximately $ 2.6 billion. In the same year, each Israeli venture capital fund raised an average amount of about 85 mil