ABSTRACT
Much more is known about formal venture capital investment than about business angels; indeed, venture capital can probably be described as an overresearched industry. In a broad sense, the term ‘venture capital’ covers external investment by venture capital companies in the equity of unquoted enterprises. In a narrow sense of ‘risk’ or ‘classical’ venture capital, the term is reserved for investment in new or growing (or turnaround) ventures only – that is, including capital for expansion but excluding investment in management buy-outs or buy-ins, secondary purchases of shares and replacement capital or the re-financing of debt.22 In the narrow sense, venture capital is, or is intended to be, all invested in growth companies (which are predominantly SMEs) and time horizons are normally short, so that investment realisations (exits) are expected to be achieved in 3-5 years with sufficient appreciation to reward the investors and return capital for further investment.23 Investors in venture capital funds managed by venture capital companies include pension funds and insurance companies, banks and funds of funds (vehicles investing in several funds for retail and other investors). The venture capital managers receive fees and a proportion of the fund appreciation (carried interest).
