Venture Capital

California is the #1 State Recipient of Venture Capital Funds

California is synonymous with quantum and incremental product innovation. The brain trust in California develops new products where nothing like them currently exists. These innovations catapult companies into change, creating exponential success and keeping them on the cutting edge. The most important product innovation of our time is the personal computer—and it was invented in California.

Because of the innovative nature of California, it is also the #1 state receiving venture capital funds. California businesses received more than 57 percent of United States venture capital in 2015. This number grew from 51 percent in 2010. This contributes to California’s standing as the state with the highest success rates for business startups and expansions.

A Description of Venture Capital Firms

Venture capital firms raise private capital from institutional investors and high net worth individuals to provide financing for early-stage, high-growth companies with a view to generating a return through an eventual realization event, such as an initial public offering (IPO) or sale of the company. Venture capital investments generally take the form of cash purchases of equity securities issued by the company, typically either preferred or common stock.

Venture capital is most attractive for new companies with limited operating history that are too small to raise capital in the public markets and are too immature to secure a bank loan or complete a subordinated debt offering. In exchange for the high risk that venture capitalists assume by making equity investments in smaller and less mature companies, venture capital firms usually receive significant influence over company decisions, in addition to a significant (usually minority) portion of the company’s ownership.

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