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The United States has long become a Mecca of technological entrepreneurship. There are a huge number of professional investors in technology businesses here. More than 1,200 venture capital funds operate in the US, with most of them concentrated around San Francisco. The main goal of a venture fund is to invest in technology companies at various stages to make money for a limited number of partners.

Types of venture funds

First, venture funds differ in the areas in which they invest. It is impossible to become successful if your focus covers everything from robotics to life extension technologies. Investors choose a fairly narrow niche within which they can form a community of experts.

Second, investors should be distinguished by the amount of money they give to the teams. Several main stages in Silicon Valley attract the maximum number of start-ups. Let’s list the most important of them.

  • Angel investments. These are the very first checks written by successful tech entrepreneurs. Typically, this amount averages $50,000-100,000. However, it is often enough for an entrepreneur to test the value of a product for customers and, by hiring the first employees, start creating a minimum viable version of the product (MVP).
  • Pre-Seed investments are made for companies that have evidence of potential customer interest but may not yet have an MVP. The average investment check is between $150,000 and $250,000. The most famous angels in the US are Ron Conway and Marc Andreessen.
  • Seed investments attract teams with an established MVP and early-paying customers. This round ranges from 500,000 to several million dollars. At the same time, the main task of the start-up is to set up scalable sales of the main product. At this stage, the key players are business angels and accelerators. The most famous are such venture funds as 500 Startups, Techstars, and First Round Capital, which has already become superstars in the venture capital market (Uber and Square), as well as Peter Thiel’s Fund (Palantir and SpaceX).
  • Post-Seed investments are intended for startups that have raised a seed round but do not have enough time to test the main hypotheses and get a good revenue stream. So, when a start-up needs another two or three quarters to develop, they need to attract additional funding. For example, $2 million for Post-Seed after $3 million Seed.
  • Series A/B/C. The amount in round A usually ranges from $2 million to $15 million. The main task of the teams here is to optimize the user base and scale to other market segments and regions. It is at this stage that professional venture funds and corporate funds appear. B series can attract tens of millions of dollars, and C – hundreds.

Investments at each stage are determined by the logic and level of development of the fund’s management team. If a person wants to invest in 5-10 companies a year with small checks, they become a business angel. If you manage to raise a fund for $10-20 million, an early-stage fund or a start-up accelerator appears. 

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