Venture capital (VC) is professional investment in startups with high growth potential, in exchange for an equity stake. The fund enters your cap table, provides financing and a network of contacts, and seeks to sell its position within five to ten years. For the issuer, it means giving up equity and accepting governance rules.
What a venture capital fund contributes and what it requires
A VC fund manages third-party money and invests it in young companies that can multiply their value. It provides capital, sector expertise, and a validation signal to customers and future investors. The money usually comes tied to milestones: the fund commits an amount and disburses it in tranches based on progress.
In return, it demands conditions. The usual ones: a minority but significant stake, a board seat, periodic information rights, and a shareholders' agreement with drag-along, tag-along, and liquidation preference clauses. These clauses condition the future sale of the company and the order of payment if something goes wrong. Before opening the door to a fund, decide how much dilution you accept and what voting rights you are willing to give up.
Venture capital and private equity: how they differ
Both are private capital, but they operate at different moments in a company's life. Private equity buys control positions in established companies; VC takes minority stakes in startups that are still burning cash.
| Criterion | Venture capital | Private equity |
|---|---|---|
| Company stage | Growth-stage startups, not yet profitable | Mature and profitable companies |
| Stake | Minority | Majority or control |
| Use of debt | Exceptional | Common (leveraged buyouts) |
| Source of return | Valuation growth | Operational improvement and leverage |
| Indicative horizon | 5 to 10 years | 3 to 7 years |
The practical criterion: if your company grows fast and is not yet profitable, your natural counterparty is the VC; if it generates stable cash flow, you will talk to private equity.
Investment stages: from pre-seed to growth
Venture capital is not a single moment, it is a ladder. Each rung corresponds to a financing round with different investors, amounts and metrics.
| Stage | What it finances | Who typically invests |
|---|---|---|
| Pre-seed and seed | Build the product and achieve the first sales | Business angels and micro-funds |
| Series A | Scale a model that already works | Venture capital funds |
| Series B and beyond | Expansion and new markets | Larger funds |
| Growth | Acceleration ahead of a sale or IPO | Growth and crossover funds |
Each stage requires different evidence, from initial traction to growth efficiency. Identify your rung before contacting funds: avoid months of conversations without a fit.
Legal framework for venture capital in Spain
Spanish venture capital entities and their management companies operate under their own regime supervised by the CNMV (Ley 22/2014). The regime distinguishes venture capital companies (SCR), funds (FCR) and other closed-ended vehicles; for the issuer the difference matters little, because it will negotiate with the management company. The startup receiving the investment does not need authorization: the regulatory burden falls on the investment vehicle.
The shares that the fund subscribes for in a public limited company are financial instruments, with the consequences that entails if they are later represented by tokens; the interests in a private limited company, by contrast, are not transferable securities (art. 92.2 of the Ley de Sociedades de Capital). Minimum check before signing a term sheet: look up the management company in the CNMV's public registers and confirm that it is registered.
Tokenized equity on the cap table: complement, not substitute
A round can combine VC funds with a tokenized equity tranche aimed at other investors. The token representing shares of a public limited company is a security token (interests in a private limited company cannot be tokenized as securities): it is still a financial instrument and its registration in Spain requires an ERIR, the entity responsible for registration and recording, the digital notary of the shareholders' register (Ley 6/2023, art. 8; RD 814/2023).
The first ERIR authorized in Spain was URSUS-3 Capital, A.V., in November 2024. For the fund nothing changes in its rights; what changes is the medium of the register. The tokenized tranche coexists with the VC on the same cap table; how it is structured is explained in tokenization of startups and cap table on-chain. If you consider that route, reserve it in the shareholders' agreement from the first round: renegotiating it later costs more.
Related: tag along and drag along.
Are you preparing a round and considering a tokenized equity tranche alongside the fund? Run the issuance diagnosis (2 min) or request a proposal. If you prefer to start by reading, download the 2026 guide.
This content is informative and educational. It does not constitute legal, tax, or investment advice. Check the current version of each regulation in the BOE and on EUR-Lex.
HokenFi is a software and infrastructure provider; it does not provide regulated services (CASP, ESI, EAF, or ERIR). This article is informative and does not constitute financial or legal advice.
Frequently asked questions
What is the difference between venture capital and private equity?
Venture capital takes minority stakes in growing startups and seeks returns through valuation increases. Private equity buys control positions in mature, profitable companies, usually using debt. For the issuer, the stage of its company determines the right counterparty.
What does a venture capital fund require in exchange for investing?
In addition to the equity stake, a fund usually asks for a board seat, periodic information rights and a shareholders' agreement with drag-along, tag-along and liquidation preference clauses. Those conditions affect the future sale of the company and the payout order.
Can venture capital be combined with tokenized equity?
Yes. A round can include a venture capital fund and a tranche of shares or interests represented by tokens. In Spain that tranche is a security token and its registration requires an ERIR, under Ley 6/2023 and RD 814/2023. The first authorized ERIR was URSUS-3 Capital, in November 2024.
