"VC" shows up in every article about fundraising. It stands for venture capital. The term covers three things: the activity, the fund that does it, and the person who invests on the fund's behalf, as in "raising from a VC." A VC fund raises money from institutional investors (LPs) and a management team (the GP) invests it in startups. A fund lasts about 10 years. It spends 3 to 4 years making investments and the next 6 to 7 supporting its portfolio companies and arranging exits. The GP earns money in two ways: an annual management fee (2% of the fund's capital) and a share of the profits at exit (20%, known as carried interest). That model explains why a VC wants a 10x return on every investment and why it rejects the vast majority of the startups that pitch it.
What does VC mean?
VC is short for venture capital. In French you'll see capital-risque, or capital-innovation, the term used by France Invest and the AMF. The acronym is used in three ways:
- the activity: taking minority stakes in private startups in exchange for equity;
- the fund: "a VC" often refers to the management firm, such as Partech or Daphni;
- the person: the partner or analyst you meet with.
Venture capital is one branch of private equity. An LBO fund uses debt to buy majority stakes in profitable companies. A VC takes a minority stake in startups that are often still losing money and bets on rapid growth. To find funds active near you, our guide to VCs in Paris lists 15 funds with their ticket sizes and stages.
What is a VC fund?
A venture capital fund is an investment vehicle that pools capital from several investors and invests it in startups with high growth potential. In return for their capital, investors receive units in the fund. When the fund sells one of its stakes (through an acquisition or an IPO), it distributes the gains according to the rules set out in its legal documents.
What sets VC apart from other kinds of investing is its target: most asset classes settle for modest returns, while VC goes after extreme ones. In the industry, a VC portfolio returning 15% a year counts as a failure. A GP therefore needs 10x or 20x on a few investments to cover the losses on the others.
LPs and GPs: the two sides of a fund
LPs (Limited Partners) provide the money
LPs supply the capital. Most are institutional investors: pension funds, insurance companies, university endowments, family offices, sovereign wealth funds, and sometimes corporates. They put money into the fund the way they would into any other asset class, then wait for returns.
LPs have no say in investment decisions and don't choose which startups the fund backs. Their involvement stops at providing capital and reviewing quarterly reports. In return, their liability is limited: they can lose only what they put in.
GPs (General Partners) run the fund and make the investments
GPs are the fund's management team. They're the partners who hear your pitch, sign term sheets, and sit on your board. They make the investment decisions, support the portfolio companies, and organize the exits.
In France, GPs must put some of their own money into the fund, at least 1% of its total capital, to qualify for the favorable tax treatment of carried interest. This builds alignment into the structure: if the fund performs badly, the GP loses personal money too.
How a fund makes money: the 2/20 rule
A VC fund earns money from two sources. The industry usually sums up the model as "2 and 20."
Management fees (2%)
Each year the GP collects about 2% of the fund's total capital to cover operating costs: team salaries, rent, travel, due diligence, and legal fees. On a €100M fund, that comes to €2M a year, enough to run a small team in Paris.
The GP earns these fees no matter how the fund performs. Even if every startup in the portfolio fails, the management fees have already been paid. This base income keeps the team running for the life of the fund.
Carried interest (20%)
Carried interest is the share of profits the GP keeps once LPs have received their original investment plus a minimum return called the hurdle rate, usually between 5% and 8% in France. Above that threshold, the GP takes 20% of net gains.
Here's a worked example. A €20M fund returns €28M at exit, with an 8% hurdle rate. LPs first get their capital back (€20M) plus their hurdle (about €5.2M). On the remaining €2.8M, the GP takes 20%, or about €560,000. The rest goes to the LPs under the waterfall structure.
What this means for founders
Carried interest shapes how a GP reads your pitch. A VC that puts €1M into your startup makes meaningful money only if you return at least 5x. If a €1M investment returns 3x (a €3M exit), the GP earns about €400,000 in carried interest. If it returns 10x (a €10M exit), the GP earns about €1.8M. For a GP, the gap between a good investment and a bad one isn't linear. That's why they filter so hard.
Why a VC aims for 10x
This is the math that first-time founders most often misunderstand.
A VC fund typically invests in 20 to 30 startups, and the statistics are brutal. Well over half of the investments return little or nothing (a shutdown, or a disappointing acquisition below the entry price). A large share return one to three times the capital invested. The handful that remain have to cover every loss and deliver the fund's target return to its LPs.
In concrete terms: if a fund raised €100M with a 3x target (returning €300M to LPs), and most of its investments return 2x at best, one or two exits at 20x or 30x are enough to hit the overall goal. This is the power law at work: a handful of investments produce most of a fund's total return. A Correlation Ventures study of 21,640 financings between 2004 and 2013 put numbers on this imbalance: 65% of deals returned less than the capital invested, and under 4% returned more than 10x.
For your pitch, the takeaway is simple. A VC can't back a startup that honestly aims for €5M in revenue within 5 years. At that scale, even a good exit barely registers in the returns of a €100M fund. VCs look for markets where a startup can reach €100M in revenue, because that's the only outcome that changes the results of the whole portfolio.
That's why they reject most of the startups they see. Usually the business is sound. What's missing is the 10x potential that would justify the risk and one of the fund's limited portfolio slots.
The life of a fund, from first close to exit
A VC fund has a fixed lifespan, usually 10 years. That time falls into three phases, and each one affects your chances of raising from it.
Raising the fund (fundraising and closings)
Before a GP can invest, it has to raise money from LPs. The process is slow and often takes more than a year. The fund holds one or more closings, and at each closing a group of LPs signs and commits capital.
A fund that announces a "first close" of €50M against a €150M target can already invest, while it keeps raising in parallel. The "final close" officially starts the investment period.
The investment phase (years 1 to 4)
The GP usually has 3 to 4 years to invest the capital. During this period, it reviews thousands of startups and backs 20 to 30 of them. The pace is intense, and an active GP meets founders every week.
This is when you have the best odds of landing a serious meeting. A fund that's actively investing has every reason to do deals, since both its investment window and its commitments to LPs are running on the clock. To prepare for that meeting and the rest of the round, follow the steps of a fundraise.
The follow-on and exit phase (years 4 to 10)
Once the investment period ends, the GP stops making new investments (apart from follow-on rounds in existing portfolio companies) and turns to growth and exits. This is the longest phase, and from the outside it looks the quietest: regular board meetings, follow-on rounds, and preparation for acquisitions or IPOs.
A fund near the end of its life (years 8 to 10) may seem slower or less eager to make a new investment. That says nothing bad about your startup. The fund's attention is on current exits rather than new investments.
What VCs look for in a startup
A large addressable market
Market size is the first filter. A VC wants a total addressable market (TAM) worth billions of euros in France or Europe. A smaller market can't produce a 10x startup, however well the team executes. Small markets can support good businesses, but those businesses don't fit a VC portfolio.
Founders who can execute
VCs invest in the founders as much as in the idea. The criteria that come up again and again: complementary skills within the founding team, industry experience or a track record as an entrepreneur, and the ability to recruit and win over people more talented than the founders themselves. A solo non-technical founder in a deep-tech startup is a red flag rather than an automatic rejection, but it's still a real point of friction.
A clear path to exit (M&A, IPO)
A VC needs liquidity: an event where it can sell its shares at a profit. The possible exits are an acquisition (a large company buys the startup) or an IPO. A market with no obvious potential buyers makes investors hesitate, even when the business is solid.
How VC funds work in France
The FPCI structure
In France, private equity funds usually take the form of an FPCI (Fonds Professionnel de Capital Investissement), regulated by the AMF. The AMF limits FPCIs to professional investors and to subscriptions of at least €100,000. This structure lets the GP benefit from the favorable tax treatment of carried interest, provided the partners co-invest personally (at least 1% of the fund's capital) and meet a minimum holding period.
Bpifrance, the default co-investor
Bpifrance shows up in almost every French Seed and Series A round. Its policy is to co-invest alongside private funds and rarely lead. For founders, that means two things in practice. If a private fund is interested, Bpifrance can easily fill out the round and add credibility. But don't plan to raise from Bpifrance alone: the public bank doesn't replace a private VC fund, which also brings its network, introductions, and operational support.
French funds to know, by stage
The French VC ecosystem in 2026 covers every stage. Our guide to VCs in Paris ranks 15 funds by stage and ticket size. In short:
- Kima Ventures (Xavier Niel's family office): fixed €150K ticket, around a hundred deals a year. A good fit if you want a fast first investor at pre-seed.
- Elaia: focused on B2B deep tech, founded in 2002 (Criteo, Mirakl, Shift Technology).
- Breega: an operator VC (every partner is a former founder), with an in-house Scaling Squad and a focus on digital and climate.
Partech is multi-stage, from Seed to pre-IPO, with €2.7B under management and international coverage that includes sub-Saharan Africa. Daphni runs on a community model (a network of 300+ entrepreneurs) and is pushing hard into deep tech with its Blue fund (€260M, January 2026).
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FAQ
What does VC mean?
VC stands for venture capital. The term refers to the activity of investing in private startups, the fund that does it, and the person who works there.
How can I invest in venture capital funds?
Individuals have two routes. FCPIs and FIPs accept small amounts and qualify for an income tax reduction, in exchange for locking up your savings for several years. Bpifrance's retail funds raised nearly €400M from more than 25,500 individuals by the end of 2025, according to Bpifrance. FPCIs, the structure most VC funds use, require a minimum subscription of €100,000, except for professional investors.
What's the difference between a VC fund and a business angel?
A business angel invests their own money, often between €10,000 and €200,000, at a very early stage (pre-seed or seed). A VC fund manages money on behalf of institutional investors and writes much larger checks (from €500K to tens of millions). VCs also run more formal due diligence, negotiate more structured board rights, and owe returns to their LPs, which drives how they select startups. To learn more about early-stage financing instruments, our guide to BSA AIR for startups covers an alternative to a standard equity round.
How much can you raise from a VC?
It depends on your stage and the fund. For a seed round in France, typically €500K to €3M. For a Series A, €3M to €15M. For a Series B, €15M to €50M or more. Kima Ventures writes fixed tickets of about €150K at pre-seed. Growth funds like Partech invest €10M to €100M in scale-ups. The ticket size follows from the fund's investment thesis, so it isn't yours to set.
How long does it take to raise from a VC?
From first contact to a signed term sheet: 4 to 12 weeks for a seed round, 3 to 6 months for a Series A. The legal closing (signing the final documents and wiring the funds) then takes another 4 to 8 weeks. All in, expect 3 to 9 months from start to finish, depending on the complexity of the deal and the number of investors involved.
When can a VC fund invest in my startup?
A VC invests once you've proven something: traction (active users, revenue), early product-market fit, or defensible technology backed by a credible team. Seed funds expect at least an MVP tested with real users. At pre-seed, some funds (Kima, Daphni, Breega) invest on conviction in the team and the market, before any revenue. Without at least some signal from the market, the GP will struggle to justify the investment to its LPs.
