Venture Capital Law
Venture Capital (VC) is financial capital provided to young, often high-potential but high-risk, companies, typically at their startup. Venture capitalists are those who invest in these types of businesses. They make their money by owning equity in the companies in which they invest. Most venture capitalists invest in companies with a novel technological innovation or business model, often in industries related to modern technology such as biotechnology, IT, and software.
Typically, a venture capital investment occurs after the seed funding round as part of the growth funding (or “Series A” round). These investments are made in the interest of generating a return through an eventual “realization event,” like an Initial Public Offering (IPO) or a sale of the company.
Venture capital is a subset of private equity investments. All venture capital is private equity, but not all private equity is venture capital.
Venture capital is often attractive for new companies with limited history that would otherwise be too small to raise capital in the public markets or to obtain adequate (or any) funding from a bank loan. For investors, the appeal is the potential of a relatively high return on investment in exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies. They also usually gain significant control over company decisions by virtue of taking ownership of a large portion of the company's ownership.
Venture capital investments are regulated as other securities investments. Many of the laws pertaining to venture capitalism are found at the federal level and are administered by the Securities and Exchange Commission (SEC).
For more information about venture capitalism, please review the materials below or use the Law Firms page of our website to find an attorney in your area who can help you with your particular issue.
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Articles on HG.org Related to Venture Capital Law
- Finding an Honest Attorney for StartupsFinding an experienced, honest start-up attorney really shouldn’t be so difficult. If you know the right places to look and the questions to ask you will have no trouble finding an experienced, ethical and honest start-up attorney to help you with your startup.
- How Does Venture Capital Work?When starting up a business, one thing virtually every business owner runs into is a need for funding. There are a few ways one can acquire these funds, like dipping into personal savings, taking out bank loans, or through traditional stock sales. But, for a lot of money fast, one approach that is increasingly popular in the Internet age is venture capital. But what is it and how does it work?
- Crowdfunding, Crowdinvesting, Kickstarter, and the JOBS ActIn 2012, the US federal government passed a bill called the JOBS act. Among its provisions was one allowing for small investments in exchange for equity in that company or project without having to go through the SEC or qualify as an investor. What is the difference between crowdinvesting and crowdfunding, what is Kickstarter, and how does it all work from a legal standpoint?
- JOBS Act: Initial Public Offering “On-Ramp”The JOBS Act, signed into law on April 5, 2012, is intended to stimulate job creation and economic growth by improving access to the capital markets for smaller companies. In an effort to facilitate capital-raising for private companies, the JOBS Act created a new class of issuer known as an “emerging growth company,” or an EGC.
- JOBS Act: SEC Must Amend Reg D to Permit Advertising for Private Offerings to Accredited InvestorsThe Jumpstart Our Business Startups Act (JOBS Act) has made several important changes to federal securities laws. One of these changes has been to require the SEC to eliminate the restriction under Regulation D prohibiting general solicitation and advertising in connection with certain private offerings.
- JOBS Act Makes Major Revisions to Securities Laws; Eases Capital-Raising for Smaller CompaniesThe JOBS Act is intended to stimulate job creation and economic growth by improving access to the capital markets for emerging growth companies. The JOBS Act contains a number of provisions designed to ease capital-raising for private companies, including:
- How to Raise Money for Your CompanyFor many private and public companies raising funds is essential to get over the hump and on the road to revenues and eventual profits. There are several things companies can do to increase their chances of successfully raising money on favorable terms.
- Venture Capital Terms: A PrimerWhether you are a company looking to raise financing or a potential investor, make sure you understand the important concepts that you will invariably be confronted with in a venture capital transaction. Even if your business is not at the juncture of raising financing, understanding the key terms now will help you start to position the company for an eventual financing round down the road. This Article provides an overview of some of the important terms in a venture deal.
- All Banking and Finance Law Articles
Articles written by attorneys and experts worldwide discussing legal aspects related to Banking and Finance including: asset protection, capital markets, corporate finance, financial planning, financial services law, investment law, offshore accounts, private equity, project finance, public finance, securities, trade investment and venture capital.
Venture Capital Law - US
- ABA - Committee on Private Equity and Venture Capital
The Committee on Private Equity and Venture Capital focuses on issues facing U.S. and international lawyers who form and represent private equity and venture capital funds and those who advise entrepreneurs and companies seeking financing from those sources. The Committee addresses the regulatory, securities, corporate, tax, intellectual property, and other concerns of the private equity and venture capital communities, including with respect to both investments by funds and the formation of funds.
- New Markets Venture Capital Program
The Act authorizes SBA to issue regulations necessary to implement the program. The regulations set forth the requirements for newly-formed venture capital companies to: qualify to become New Markets Venture Capital (“NMVC”) companies; to make developmental venture capital investments in smaller enterprises located in low-income geographic areas; provide operational assistance to enterprises receiving such investments; and allow existing Specialized Small Business Investment Companies to qualify for grants to provide operational assistance to smaller enterprises located in low-income geographic areas.
- NVCA Public Policy
NVCA is the leading public policy advocate for the venture capital industry. The Association works with all branches of government and the media in order to foster a better understanding of how venture capital positively impacts the U.S. economy and advocates for policies that encourage innovation, new business creation and entrepreneurship.
- Venture Capital - Definition
Ivestopedia defines and explains venture capital.
Organizations Related to Venture Capital Law
- Community Development Venture Capital Alliance
CDVCA is the network for the rapidly growing field of community development venture capital (CDVC) investing. CDVC funds provide equity capital to businesses in underinvested markets, seeking market-rate financial returns, as well as the creation of good jobs, wealth, and entrepreneurial capacity.
- Dow Jones - Private Markets and Venture Capital
Dow Jones gives you a competitive edge with accurate, comprehensive news, research and analysis on the private capital markets.
Entrepreneurship.org features a vast array of content and resources to assist entrepreneurs, business mentors, policy makers, academics and investors through each phase of the entrepreneurial process. The content ranges from resources entrepreneurs need to launch a company to policies and research that has been conducted regarding entrepreneurship.
- National Venture Capital Association (NVCA)
The National Venture Capital Association (NVCA), comprised of more than 400 member firms, is the premier trade association that represents the U.S. venture capital industry. NVCA's mission is to foster greater understanding of the importance of venture capital to the U.S. economy, and support entrepreneurial activity and innovation. The NVCA represents the public policy interests of the venture capital community, strives to maintain high professional standards, provides reliable industry data, sponsors professional development, and facilitates interaction among its members.
- VC Task Force
VC Taskforce has built an organization that the venture community can give input and direction to and get immediate results that benefit both investors and their portfolio companies. We were established to provide a system of services including: business, legal and financial programs that provide real-time, strategic and tactical information addressing imminent concerns of venture capitalists and portfolio companies. VC Taskforce provides a forum for many types of investors: LPs, venture capital firms, institutional investors, PE and portfolio company management in which they can share ideas and information that will help them manage their businesses for maximum success.
Publications Related to Venture Capital Law
- SBA - Seed and Venture Capital Financing
Venture capital is typically provided to early-stage start up companies that have high growth potential in industries such as biotechnology, information technology and manufacturing. Venture capital investments are generally made as cash investments in exchange for shares in the company.
- US Venture Capital Sector
Venture capital in the US can be divided into 'professional' and 'angel' finance. 'Professional' venture capital is typically provided through venture capital funds, while 'angel' venture capital is more usually invested direct by one or a small number of private individuals. Generally, venture capital investors can be said to invest alongside management in young, rapidly growing companies that have the potential to develop into significant economic contributors. Venture capital is an important source of equity for start-up companies.