The National Venture Capital Association in the United States defines venture capitalists as “professional investors who specialize in funding and building young, innovative enterprises. Venture capitalists are long-term investors who take a hands-on approach with all of their investments and actively work with entrepreneurial management teams in order to build great companies”.
Venture capital vs angel investing and private equity
The common thread between these 3 types of investors is that they all invest in private companies. While there are many differences, one of the key differentiators is the growth stage of the company.
- Angel investors usually invest in a company that is still very early in its development. The management team might have an idea that needs to be tested, or a product that needs to be developed. Investors expect the management team to be able to raise additional funding once the concept is proven. The typical investment size is less than USD1 million, with a 5+ year holding period.
- Venture capital investments range from the early product development stages to the revenue generating phase. Companies may or may not need additional funding before they are able to reach a cash flow positive position. Investment sizes also have a wide range, depending on the sector. Venture capital investors have a long-term time frame and play an active role within the company’s board of directors, and occasionally in the operations.
- Private equity investments are made in more mature companies that generate steady cash flow. Investment sizes also have a wide range, depending on the size of the company. Typical private equity investors look for a 3-5 year holding period.
What is DFJ VinaCapital’s investment position?
DFJ VinaCapital seeks to help entrepreneurs continue to grow their businesses through capital investments as well as operational guidance and access to professional networks. The key criteria we look for in an investment include:
- Motivated and talented management team
- Product or service with a strong potential in the Vietnamese or international market
- Operational history that includes generation of revenue within 6 months of investment