Venture Capital

AAA

DEFINITION of 'Venture Capital'

Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.

INVESTOPEDIA EXPLAINS 'Venture Capital'

Venture capital can also include managerial and technical expertise. Most venture capital comes from a group of wealthy investors, investment banks and other financial institutions that pool such investments or partnerships. This form of raising capital is popular among new companies or ventures with limited operating history, which cannot raise funds by issuing debt. The downside for entrepreneurs is that venture capitalists usually get a say in company decisions, in addition to a portion of the equity.

VIDEO

Loading the player...
RELATED TERMS
  1. Capitalization Table

    A spreadsheet or table that shows ownership stakes in a company, ...
  2. Adventure Capitalist

    1. Another word for "venture capitalist", or someone who invests ...
  3. Death Valley Curve

    A slang phrase used in venture capital to refer to the period ...
  4. Term Sheet

    A non-binding agreement setting forth the basic terms and conditions ...
  5. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
RELATED FAQS
  1. What other sectors are most similar to banking?

    The banking system is not technically a sector, but rather an industry within the financial services sector. Other similar ... Read Full Answer >>
  2. What are the primary risks associated with investing in the drugs sector?

    Investors in the drug sector must be aware of the regulatory challenges, competition and financial concerns associated with ... Read Full Answer >>
  3. How does government regulation impact the drugs sector?

    Government regulation lengthens the process for bringing new pharmaceuticals to market and restricts the drugs sector to ... Read Full Answer >>
  4. Can an investor in the drugs sector buy companies that produce medicinal marijuana?

    Investors may purchase stock in companies producing medical marijuana products, or they may invest in the newly available ... Read Full Answer >>
  5. What countries represent the largest portion of the global financial services sector?

    China and the United States remain the most notable players on the financial sector scene. The U.S. has come to specialize ... Read Full Answer >>
  6. How has investing in the Internet sector evolved over time?

    Investing in the Internet sector has become more conservative over time. It reflects a more measured approach that shies ... Read Full Answer >>
  7. What other sectors are most similar to financial services?

    Typically, the financial services sector allows countries to export goods and turn agricultural and manufacturing products ... Read Full Answer >>
  8. What are some ways of financing an acquisition?

    A purchasing company can finance an acquisition by raising private equity, receiving a bank loan or striking a mezzanine ... Read Full Answer >>
  9. Which industries can benefit the most from venture capital?

    In terms of attracting venture capital, a 2013 report from advisory firm PwC indicated that companies involved in technology ... Read Full Answer >>
  10. How is venture capital different from other kinds of equity financing?

    Small businesses have a variety of options for raising capital for the purpose of funding growth operations or start-up costs. ... Read Full Answer >>
  11. Where does venture capital come from?

    Venture capital comes from investment banks, wealthy investors and other financial institutions that support venture investment. ... Read Full Answer >>
  12. How can I become a venture capitalist?

    Many paths lead to venture capitalism, none of which are set or absolute. According to Forbes, there are two primary categories ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    How Venture Capitalists Make Investment Choices

    In order to increase your odds for receiving funding, here are some criteria considered by venture capitalists.
  2. Fundamental Analysis

    Cashing In On The Venture Capital Cycle

    Find out how VC firms make the market go round, and round and round.
  3. Home & Auto

    Filling The Gaps In General Liability Insurance

    Standard liability coverage may not be enough. Special needs call for specialized policies.
  4. Investing

    Georges Doriot And The Birth Of Venture Capital

    Venture capital has been around for centuries, but Georges Doriot turned it into a structured field of investment.
  5. Mutual Funds & ETFs

    Private Equity A Trendsetter For Stocks

    In this article, we'll show you how private equity sets the trend for stocks everywhere.
  6. Entrepreneurship

    Valuing Startup Ventures

    Valuing a company is a difficult task, regardless of the size of the business - but these methods can help.
  7. Options & Futures

    When Your Business Needs Money: Angel Investors

    If you have a promising business that needs a boost, you may be able to put your faith in these wealthy investors.
  8. Mutual Funds & ETFs

    Financial Funds Provide Diversity ... And Risk

    Sector funds can provide maximum exposure to financial industry stocks, but this benefit is a double-edged sword.
  9. Entrepreneurship

    Top 9 Venture Capital Interview Questions

    Ace your interview by learning how to break down the most common questions asked.
  10. Personal Finance

    Seek An Adventure In Venture Capital

    Make a career out of chasing down the "next big thing".

You May Also Like

Hot Definitions
  1. Loan-To-Value Ratio - LTV Ratio

    A lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage.
  2. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  3. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  4. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  5. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  6. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
Trading Center