Venture capital firms are investors who provide funds to small businesses and “start-ups”. If this sounds like a risky way to spend one’s money, it can be. For every Apple or Amazon, there’s a promising business idea that ends up not only taking down its creators but its investors as well. And yet, one doesn’t get Fortune 500 companies without taking some risks. By providing finances to a business on the ground floor, an investment firm like Pacific Advantage Capital (“PAC Partners”) is in an excellent position to rake in profits if they do come. Or perhaps there won’t be a large initial return on an investment, but there will be recurring revenue (as in repeat customer business) from the company that was invested in. Sometimes the reasons for investing have little to do with visible financial profit. The investors may simply believe in the new company’s mission, for example. Or financial backing of a new start-up may reap considerable public relations rewards for a venture capital firm. Whatever their reasons, these investors are seldom idle. See below to see which venture capital firms are sticking their necks out these days. Will these financial risks pay off?
This branch of the juggernaut that is Google provides “seed” money to technology based small businesses and start-ups. One of its most recent beneficiaries is Quettra , the brain child of a former Google employee. The still-in-the-works (and controversial) Quettra will allow advertisers to glean personal information from users of mobile devices.
Victory Park Capital
This firm recently began working with Square , a company that in turn provides loan alternatives to even smaller companies. With financial backing from Victory Park, Square recently created Square Capital , which will provide merchant cash advances to small businesses.
Wait! The entertainment giant is a venture capitalist firm, too? It is one of many huge corporations that dabble in funding projects at much smaller companies that seem to have nothing to do with its main mission. Case in point: Disney is one of the companies providing seed money to tiny gaming companyPlayFab which is developing new technology to track online gamers. Potential buyers are already lining up for the results.
One way a venture capitalist firm keeps risks down is by being one of multiple investors. However, Sequoia made headlines recently by becoming the “sole institutional investor” in Medallia, a firm that develops software which is used to track customer hotel experiences. This may seem risky, but Sequoia tendered no money until Medallia demonstrated that it could turn a profit, and the company’s value has since grown fivefold.