An institutional investor is an organization that invests capital on behalf of beneficiaries, members, clients, or a larger fund. In start-up finance, institutions provide substantial capital as companies move beyond early funding stages and require resources to scale. section 12.1.3 section 12.2.1
Institutional capital commonly comes from:
- Pension funds, sovereign wealth funds, and university endowments. section 12.2.1
- Large private investors, including ultra-high-net-worth individuals. section 12.2.1
- Investment firms that combine capital and provide legal, accounting, strategic, networking, and fundraising support. section 12.1.3
Institutional access through a venture fund
A retail investor usually cannot invest directly with a top venture capitalist. A fund manager instead pools larger private investments, often requiring at least $100,000, then invests across multiple start-ups. A typical arrangement includes a 2% annual management fee and 20% carry on profits, so a $100,000 profit produces $20,000 in carry before other deductions. section 12.2.1
