Venture
Capital
Venture
capital (also known as VC
or Venture) is a type of private equity
capital typically provided to early-stage, high-potential,
growth companies in the interest of generating a return
through an eventual realization event such as an IPO
or trade sale of the company. Venture capital investments
are generally made as cash in exchange for shares in
the invested company.
Venture capital typically comes from institutional investors
and high net worth individuals and is pooled together
by dedicated investment firms.
A venture capitalist (also known as
a VC) is a person or investment firm that makes venture
investments, and these venture capitalists are expected
to bring managerial and technical expertise as well
as capital to their investments. A venture capital
fund refers to a pooled investment vehicle
(often an LP or LLC) that primarily invests the financial
capital of third-party investors in enterprises that
are too risky for the standard capital markets or bank
loans.
Venture capital is most attractive for new companies
with limited operating history that are too small to
raise capital in the public markets and are too immature
to secure a bank loan or complete a debt offering. In
exchange for the high risk that venture capitalists
assume by investing in smaller and less mature companies,
venture capitalists usually get significant control
over company decisions, in addition to a significant
portion of the company's ownership (and consequently
value).
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