All companies started with a dream. Dreams must be backed by a plan and plans must be backed by money. For businesses with strong potential, committed leaders, good products or services and realistic goals, the only – and biggest – ingredient most often missing is money. Start-up capital is difficult to secure because investing in new businesses can come with extraordinary potential, but always comes with extraordinary risk.
Venture capital firms are in the business of choosing which businesses are worth investing in. The money they put up comes from investors who expect to make money of their own in return. The good venture capital firms provide not just money, but guidance and expertise. The bad ones risk too much, look at companies as products and view investors as ATM machines.
Here are some of the top venture capital firms in the world.
Gabriel Venture Partners
Co-founded by Rick Bolander, Gabriel Venture Partners invests between $3 million and $6 million in exchange for a significant ownership stake in companies that are capital efficient. These companies must not require more than $15M to reach cash-flow positive operations, an exit, or a significant valuation to raise growth capital.
The leaders at Gabriel believe the firm’s strategy makes it both more resilient and allows it to deliver higher returns than larger funds. The firm’s model is based on “capital efficiency,” which “doesn’t rely on getting a billion-dollar valuation to achieve the homerun exit to generate significant returns for entrepreneurs and limited partners. The homerun exit in this capital efficient model is aligned with the capital market returns where 99 percent of the venture-backed companies exit at less than a billion dollar valuation.” Basically, as the size of merger and acquisition deals sizes get smaller, Gabriel’s capital-efficient model can bring in more with less.
When it comes to specialty biotech venture capital firms, Domain Associates is one of the best and most well known. Founded in 1985, Domain has been involved in the formation of 210 companies in its business lifetime. Domain invests in one industry only – life science companies. The firm’s website says that it chooses “to be a part of the first institutional financing round of the company.” Domain Associates invests in not just private firms, but also works with a small number of public companies. With these companies, the firm will take a seat on the company’s board and become a part of the company’s decision-making process.
Bessemer Venture Partners
In business since 1911, Bessemer is one of the oldest venture capital firms in the country. It was originally formed with the proceeds from the sale of Carnegie Steel. With offices in New York, Silicon Valley, Boston, Mumbai and Herzliya, Bessemer manages more than $4 billion of venture capital, which is invested in more than 130 companies around the world.
Bessemer focuses on a “roadmaps” strategy, which seeks opportunities across a vast range of industries. Since 2010 alone, Bessemer Venture Partners has realized 11 initial public offerings including Cornerstone, LinkedIn, Yelp, Millennial Media, Eloqua and LifeLock. The company has also been involved in multiple large acquisitions of companies that they retain in their portfolio. Among them are: IAG by Nielsen, Sirtris by Glaxo, Gracenote by Sony, Bladelogic by BMC, PA Semi by Apple, Pure Networks by Cisco, Storwize by IBM, Vertica by HP, and Endeca by Oracle.
Focused on electronics, Walden International works with businesses that specialize in semiconductors, electronics and digital consumer, software and IT services, as well as those that deal in clean technology, communications, and emerging technologies. Walden has nearly $2B in committed capital. Walden works with companies that are in either the early, seed, or expansion phases. They do business in the US, China, Israel, India, Taiwan and across Southeast Asia, but they are headquartered in Palo Alto, Calif. Generally, they only invest in companies with capital needs not totaling more than $15 million.
The Carlyle Group
Among the world’s largest and most successful venture capital firms, Carlyle is a global alternative asset manager with more than $189 billion in assets under management across 118 funds and 106 funds vehicles. Carlyle employs more than 1,500 people in 34 offices throughout North America, South America, Europe, the Middle East, North Africa, Sub-Saharan Africa, Japan, Asia and Australia. Carlyle breaks its business down into four categories:
- Corporate Private Equity – buyout and growth capital
- Real Assets – real estate, infrastructure and energy and renewable resources
- Global Market Strategies – distressed and corporate opportunities, corporate mezzanine, energy mezzanine, hedge funds and structured credit
- Solutions – private equity fund of funds program and related co-investment and secondary activities, and real estate funds program
Masthead Venture Partners
Masthead stays profitable by focusing on what it knows. Investing primarily in the software, Internet infrastructure, communications technology and IT-intensive life science applications sectors, Masthead primarily does early stage seeding. Masthead believes “these sectors offer strong future prospects and present numerous investment opportunities. Masthead invests in those companies creating new solutions to critical business challenges.”
Formed in 1997, Skyline invests in healthcare companies in the early stages of development. The company’s areas of expertise include small molecule and protein therapeutics, medical devices, diagnostics, and technologies that facilitate drug discovery and life-science research. All company leaders have MD or PhD degrees, as well as hands-on experience in numerous start-up healthcare companies that went on to go public.
The best venture capital firms are partners with their seed business for the lifetime of the company. They make money for their investors and provide the rocket fuel needed for promising, but under-funded, companies to grow. Choose the wrong one, and lose your investment – or your best shot at starting a business. Choose a good one, and find success and a lifelong contact.