What is Venture Capital
Venture capital (otherwise known as VC) is a type of private equity capital provided to early-stage and high-potential, growth companies. The ultimate objective is to generate a return through a “liquidity” event such as an IPO or trade sale of the company. VC investments are usually made in the form of cash in exchange for preference shares in the invested company.
A venture capitalist can be an individual or investment firm that makes venture investments. These venture capitalists are expected to provide their managerial and technical expertise along with capital to the invested companies.
A VC 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 normally considered too risky for the typical financial institutions.
Hence, new companies with limited operating history, which are too small to raise capital in the public markets and not sufficiently mature to secure a bank loan or complete a debt offering will find VC funding a highly appealing option.
In exchange for the high risk that venture capitalists undertake when investing in smaller and less mature companies, venture capitalists have a significant influence on company decisions.