Venture Capital

DEFINITION of venture capital

Venture capital is funding investment, or available for investment, in an enterprise that offers the probability of profit along with the possibility of loss.


Funds used for startup businesses with exceptional growth potential, which are subject to more than a normal degree of risk. Management and technical expertise are sometimes provided.

Venture capital is one type of risk capital. However, it often doesn’t tend to think that this investment involves an element of risk.

All levels of this type of capital, look to hold their investments for between five and seven years.

After that, they look to exit through a sale or from selling shares to another investment firm upward or lateral in the chain.

Venture capitalists were instrumental in the enormous increase in the number of dotcom startups in the mid-to-late 1990s.

This is still a great option for startups that are looking to scale big and quickly. Because the investments are fairly large, your startup has to be prepared to take that money and grow.

The firm like this is usually run by a handful of partners who have raised a large sum of money from a group of limited partners to invest on their behalf.


The biggest advantage of working with venture capital firms is that you’re not on the hook for the money, because there are no loans, no obligation to pay it back.

Venture capitalists come to the table with a lot of business and institutional knowledge. They’re also well connected with other businesses. Especially if that could help them and their startups.

Venture capital is the second or third stage of a traditional startup financing sequence, which starts with the entrepreneurs putting their own available funding into a shoestring operation.

First-round venture capital funding involves a significant cash outlay and managerial assistance.

The end game of venture capital is to support the growth of ambitious companies. Of course, with the hope of the company doing well enough for investors to receive a sizeable return on their investment.

Some of the world’s largest companies, including Google, Facebook, Microsoft, and Amazon, received venture capital investment in their early days.

With investors earning many multiples in return.