venture capital

Venture Capital

Financing for new businesses. In other words, 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 and typically entails high risk for the investor but has the potential for above-average returns.

Notes:

It 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 a limited operating history and who cannot do so through a debt issue. The downside for entrepreneurs is that venture capitalists usually get a say in company decisions in addition to a portion of the equity.

See also: Angel Investor, Down Round, IPO, Seed Capital, Series A (Preferred Stock), Traunch, Venture Capitalist, Vulture Capitalist

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Venture capital

An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.

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venture capital

A pool of risk capital, typically contributed by large investors, from which allocations are made available to young, small companies that have good growth prospects but are short of funds. Small investors can buy new issues or participate in mutual funds that specialize in the supply of venture capital. Also called risk capital.