venture capital

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

The provision of funding for a start-up. For example, suppose a company with little access to capital is attempting to open a new market or access an old one with a better product. It may not be able to receive loans, either because of an unproven track record or because it is already significantly in debt, and it may have exhausted financing from family and friends. Venture capital allows this company to begin and build upon its operations by providing necessary funding. Usually, the provider of venture capital takes equity in the company in exchange for the money. Venture capital firms may also provide needed expertise in how to run a business than can help the start-up become successful.

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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.

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Venture capital (VC). Venture capital is financing provided by wealthy independent investors, banks, and partnerships to help new businesses get started, reach the next level of growth, or go public.

In return for the money they put up, also called risk capital, the investors may play a role in the company's management as well as receive some combination of equity, profits, or royalties.

Some venture capital also goes into bankrupt companies to help them turn around, or to companies that the management wants to take private by buying up all the outstanding shares.

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venture capital

A common name given to money raised for investment in high-risk enterprises. Venture capital firms may specialize by industry and/or by stage—seed money for start-ups, midstage firms on the brink of success but needing additional capital, or successful firms capable of expansion to a regional or nationwide platform. There is a National Venture Capital Association (www.nvca.org). Sometimes called angel investors.

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Venture Capital

What Does Venture Capital Mean?

Private financing used to fund a new business; in other words, money provided by investors to start-up firms and small businesses with perceived long-term growth potential. This is a very important source of funding for start-ups 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 also can 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, that have a limited operating history and cannot raise funds through a debt offering. The downside for entrepreneurs is that venture capitalists usually get a say in company decisions in addition to a portion of the equity.

Related Terms:
• Capital
• Capital Structure
• Initial Public Offering—IPO
• Mezzanine Financing
• Private Equity