What Is Venture Capital?
Venture capital is a type of private equity financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capitalists typically invest in exchange for an ownership stake in the company, which gives them a say in how it is managed and allows them to share in its profits if it succeeds. The venture capitalist provides not only money but also expertise, contacts, and other resources that can help the business grow.
The goal of venture capital investments is usually high returns over a relatively short period of time; however, there is always risk involved since most startups fail or do not reach their full potential. To mitigate this risk, venture capitalists often spread their investments across multiple companies so they don’t put all their eggs into one basket. They may also require certain milestones be met before additional funding will be provided or demand board seats as part of the investment agreement.