What do Venture Capital (VC) firms do?
VC firms invest in startups which have long-term growth potential, in exchange for equity.
VC firms benefit startups by helping them to grow. In return, they intend to benefit themselves by exiting profitably from those startups in the long run.
How do VC firms work?
VC firms pool money from various investors to establish a fund, which is then invested into a portfolio of companies. In general, the contribution of a VC firm to this fund is very small.
The primary task of a VC firm is to manage the fund it pools from various investors. At any given point of time, a VC firm may handle multiple funds, each fund being invested into a portfolio of companies. The VC firm identifies investable businesses, carries out the screening process (evaluating pitches, conducting meetings and due diligence, preparing term sheets, etc.), and conducts the contract signing and fund transfer processes.
VC firms may choose to invest in specific industries, stages of funding and geographic locations.
The top VC firms in the world
Mentioned below are ten of the top VC firms in the world, in chronological order of establishment.
Bessemer Venture Partners
Bessemer Venture Partners was founded in 1911 and is based in San Francisco, California. It invests in startups in their early to growth stages in the consumer, enterprise and healthcare sectors. It has funded companies like LinkedIn, Shopify, Pinterest, Fiverr and BigBasket. The company puts emphasis on diversity, equity and inclusion when making investment choices. It has offices in India, Israel and the UK in addition to the US, and manages assets worth $20 billion.
Sequoia Capital
Sequoia Capital was founded in 1972 and is based in Menlo Park, California. It invests in AI/machine learning, consumer, crypto, enterprise, healthcare and fintech industries, from early to late stages. Its investment portfolio includes Zoom, Apple, Airbnb, WhatsApp and DoorDash. It has offices in Europe, India, China and Southeast Asia.
Kleiner Perkins
Kleiner Perkins is another VC firm which is based in Menlo Park, California, and was established in 1972. It funds startups in all stages from inception to IPO, and focuses on consumer goods & services, fintech, enterprise, hardtech and healthcare industries. Its portfolio comprises of companies like Amazon, Twitter, Google, Coursera, Uber and Truecaller.
New Enterprise Associates
Founded in 1977, this VC firm invests in technology (enterprise & consumer) and healthcare (life sciences & digital health). It funds startups in early to growth stages across the world, but emphasizes on companies in Europe and Asia. Its portfolio includes Databricks, Coursera, DataRobot and MoonPay. As of December, 2022, it had $ 25 billion of assets under management.
Accel
Founded in 1983, Accel is based in Palo Alto, California. Although it normally invests in early and growth stage startups, it rolled out a late stage fund as well in 2022. It invests in the following sectors: cloud/SaaS, consumer, enterprise IT, fintech, hardware, healthcare, media, security, and services. Some of the companies it has invested in are Dropbox, Etsy, Qualtrics, and 1Password. It has offices in India and the UK in addition to the US.
Intel Capital
Founded in 1991, Intel Capital is based in Santa Clara, California. It invests in early stage tech-based startups, focusing on four domains- cloud, devices, frontier and silicon. It has invested in companies like Adhawk, DataRobot, Beep, Colltech, etc.
Index Ventures
Established in 1996, Index Ventures has headquarters in both San Francisco and London. It invests in seed to growth stages of technology-enabled startups in Europe, the U.S. and Israel. It has invested in companies like Deliveroo, Farfetch, Slack, Dropbox, and Adyen.
Khosla Ventures
Khosla Ventures was founded in 2004 in Menlo Park, California. It invests in early to late stage startups across numerous industries including consumer, enterprise, education, robotics, financial services, semiconductors, advertising, health, big data, agriculture/food, and sustainable energy. It has over $15bn of assets under management, and has invested in companies like Academia.edu, AppNexus, Boku and Climate Corporation.
Founders Fund
Founders Fund was founded in 2005 in San Francisco, California. It invests in startups in the aerospace and transportation, biotechnology, advanced machines/software and energy sectors, from early to late stages. Its portfolio includes companies like SpaceX, Spotify, Figma, Lyft, Facebook, Airbnb and Stripe. The firm had $11 billion under management as of January, 2023.
Andreessen Horowitz
Established in 2009 in Silicon Valley, California, Andreessen Horowitz is also known as “a16z”. The company identifies itself as “stage agnostic”, which means that it invests in all stages. It focuses on companies in the crypto, bio & healthcare, consumer, enterprise, fintech and games industries. It also invests in companies which add to American dynamism, i.e., companies which serve the national interest of the USA by contributing to sectors like defense, public safety, education, housing, supply chain, aerospace, industrials and manufacturing. Its portfolio includes Facebook, Pinterest, Lyft, Boku, BuzzFeed, Gobble, GitHub, and Scribe Therapeutics. Andreessen Horowitz manages assets worth $35B across various funds.
Conclusion
Venture capital is an exciting world which powers the possibilities of the future. To learn more about VC firms, you may read our other articles here.
