Work Week 3: Venture Capital in San Francisco

San Francisco and Silicon Valley to the south have been home to innovation, more specifically, the area has become synonymous with technological innovation. Today, companies like HP, Intel, Apple, Google, eBay, Cisco, Oracle, Genentech, and Facebook call San Francisco and the Valley home. So, too, do the venture capital and law firms that have made fortunes along with the companies themselves.

My company is a small venture capital in San Francisco called A-Force Ventures, which is an early stage fund that invests in consumer internet and mobile startups. A-Force Ventures target early stage investments, either seed or pre-seed, in the consumer lifestyle sector across travel, health, entertainment, consumer products, dating, fashion, and education. It is meaningful to invest in and support some of the smartest and most passionate entrepreneurs who are creating groundbreaking products and services that make our lives better, more connected and more fulfilling.

Venture capital firms hire the best and brightest minds within the investment industry in order to make investments that are profitable in any economic climate. The margins generated from investments are extremely high and are recurring in nature. The barriers for entry for a new venture capital is high, as it need large amount of capital and intangible human resources. The other benefit for a venture capital firm is that once they are established, profitability tends to increase substantially as they acquire additional rounds of capital for their investment operations. And also as for my company mainly focus on internet and mobile investment, San Francisco is a big city for technology innovations and start-ups, this is the geographic strength for my company.

Over the past twenty years, the number of people operating venture capital firms has increased substantially. This is due to the fact that these companies generate very large returns for their investments. The demand among pension funds and large corporations to have access to companies that can place their capital in profitable investments is significant. As such, a number of highly talented money managers has entered this field. It should be noted that one of the primary weaknesses of these businesses is that regulations are expected to remain stringent. Another biggest weakness of venture capital firms is their extreme uncertainties. As an investor, we have to have good eyes in order to make a decision which start-ups to invest.

Venture capital firms increase their revenues by cashing out investments, reinvesting capital provided by investors, as well as by acquiring additional rounds of capital in order to further fuel the growth of these entities. Many fund managers often launch new limited partnership every two to three years in order to have greater access to capital.

Regulatory  issues are always a continued threat for most venture capital firms. However, there are currently only a limited number of legislation pieces that would impact the way that venture capital firms operate. Generally, these regulations simply call for greater disclosures for investors. Competitive issues are a minor threat to a venture capital firm once a strong track record is established.  Also , the limited information on website regarding investment specifics to potential venture capitalist is another issue for venture capital to evaluate the company.

 

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